A Cautionary Tale for Startups

  • Why it matters

    Why it matters

    Unister is a powerful example of how mismanagement can lead to the spectacular downfall of seemingly successful startups.

  • Facts


    • Unister, owner of 40 different websites, declared insolvency in July after building up a mountain of debt and the death of its two founders.
    • Lucas Flöther, one of Germany’s most experienced bankruptcy lawyers, has been administering the company’s affairs.
    • Rockaway Capital, a Czech investor, has agreed to buy Unister and will take over at the end of January.
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Dringender Tatverdacht gegen Unister-Manager
Unister came to a dramatic end in July. Source: DAPD

When a start-up fails, Lucas Flöther is the man who cleans up the mess left behind. The 42-year-old bankruptcy lawyer has handled some of Germany’s most infamous cases of insolvency, but few compare to the tragic downfall of the once promising online travel giant Unister.

Like many of Mr. Flöther’s cases, Unister was in trouble long before it actually declared insolvency. The company’s co-founder, Thomas Wagner, made a trip to Venice, where he sought to obtain a loan from a mysterious person described as an Israeli diamond dealer.

Mr. Wagner and his partner Oliver Schilling, however, never made it back to Germany. They both perished when their return flight crashed over Slovenia. The company filed for insolvency four days later.

Nearly six months after Unister declared insolvency, Mr. Flöther is still trying to piece together an exact account of the company’s total debt.

“The tragedy of two people losing their lives in a plane crash makes this case unique,” Mr. Flöther told Handelsblatt. “But if you look beyond that for just a moment, there are many aspects that are very typical of startup companies.”

When Mr. Flöther started working the case, he found a company account in Leipzig, Unister’s home city, that didn’t have a single cent left in it. Unister’s financial obligations stood at just under €163 million ($169 million), according to an audit report.

Nearly six months after Unister declared insolvency, Mr. Flöther is still trying to piece together an exact account of the company’s total debt. The firm’s leadership didn’t keep the company books in order and regularly transferred money between its many subsidiaries, leaving behind an opaque picture.

It’s not an uncommon problem at startups, Mr. Flöther said. Many new companies, led by young and inexperienced entrepreneurs, fail to adhere to basic financial planning and accounting standards, often leading to their downfall.

“I often see agreements that are hundreds of pages long, printed on fancy paper, as well as terrific PowerPoint presentations,” Mr. Flöther said. “Then I ask: ‘Can you write up your revenue and expenses on a single sheet of A4 paper?’ Many say they don’t have that handy.”

Unister’s story began like that of many startups. The late Mr. Wagner founded the travel website with classmates back in 2002 when he was a 23-year-old student at the University of Leipzig. Within a short period of time, the website took off and was held up as a model in the ailing eastern state of Saxony.

“In Germany, we have to learn that insolvency isn’t a stigma.”

Lucas Flöther, Unister insolvency administrator

The regional government in Dresden pumped €7.75 million worth of investment benefits into Unister and another €9.4 million in loan guarantees. Unister, however, did not know how to manage the money.

Flush with cash, the company made a mistake common to many startups – it overextended itself through a costly acquisition spree. Unister became Germany’s largest seller of package tours through about 40 different sites, such as travel24.de.

“The danger is that you lose the overview,” Mr. Flöther said. “People are hired, departments are created and companies are bought – and then nobody keeps track anymore. Very confusing structures with cancerous growths arise and nobody has time to cut them out.”

Unister’s downfall began in 2011 when Google shut down the company’s arbitrage business model. Under this system, Unister was paying Google large sums of money to have its various websites – kredit.de, shopping.de and auto.de – featured prominently in the search engine’s results page, resulting in more clicks and more revenue.

Google’s decision to cancel Unister’s arbitrage model left the company with a major financial gap. To compensate, it developed new products such as a trip cancellation policy for its travel business. But public prosecutors considered this policy illegal, a determination that landed Mr. Wagner and his managers in police custody for several days.

Ultimately, Unister decided to sell its core travel business. Interested investors, however, declined to step in and rescue the company. Unister had no choice but to declare insolvency.

Lucas Flöther is a leading bankruptcy lawyer. Source: Flöther & Wissing

“Hope dies last, that’s human,” Mr. Flöther said. “People fear losing their company car or are afraid of personal liability. But the sooner you file for insolvency, the higher the chance that the company can be saved.”

A Czech investor, Rockaway Capital, has since bought Unister for a sum in the two-digit million range with the aim of creating a pan-European holiday conglomerate. Jakub Havrlant, the head of Rockaway, is set to take over what remains of Unister at the end of the month.

“In Germany, we have to learn that insolvency isn’t a stigma,” Mr. Flöther said. “If you’re ready to learn, then you’ve earned a second chance. People who wait until everyone is gone and haven’t paid the gas and electricity bills for months squander trust – and also open themselves up to prosecution.”


Miriam Schröder is based in Berlin and covers the city’s startup scene. Christoph Schlautmann covers the logistics and waste management sectors for Handelsblatt. To contact the authors: m.schroeder@handelsblatt.com, schlautmann@handelsblatt.com

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