The $90 Million Convertible Note: Flexible Capital for Growth

In 2025, a $90 million convertible note propelled “FreightFlow,” a fictional logistics startup specializing in AI-driven supply chain solutions, to new heights in the $300 billion global logistics market. This flexible capital, provided by Apollo Global Management, leveraged FreightFlow’s $40 million ARR to fund technology upgrades, market expansion, and operational scaling without immediate equity dilution. By offering a hybrid financing structure, the convertible note positioned FreightFlow for rapid growth while keeping future options open. This case study explores the deal’s structure, execution, and impact, highlighting the role of convertible debt in fueling high-growth ventures.

The Mechanics of a Convertible Note in Logistics

A convertible note is a short-term debt instrument that converts into equity at a future event, such as a funding round or maturity, often at a discounted valuation. In logistics, where capital-intensive scaling is critical, this growth note provides flexible financing to fund innovation and expansion while deferring valuation decisions. Typically carrying 4–8% interest, convertible notes offer startups agility and investors upside potential.

FreightFlow’s $90 million convertible note, advised by Morgan Stanley, capitalized on its 4.8:1 LTV-to-CAC ratio and 87% customer retention, valuing the company at $500 million. Consequently, this debt-equity financing enabled FreightFlow to enhance its AI platform, mirroring strategies like Flexport’s $200 million convertible note in 2022.

FreightFlow’s $90 Million Convertible Debt Deal

FreightFlow, serving 2,000 logistics providers with AI-optimized routing, secured the convertible note to meet demand for efficient supply chain solutions. Competing with FourKites, FreightFlow aimed to boost ARR by 30% to $52 million by 2027. The 2025 hybrid financing deal funded technology, global expansion, and hiring, positioning FreightFlow as a logistics innovator.

Structuring the Flexible Capital Agreement

The $90 million note carried a 5% interest rate, a 3-year term, and conversion at a 20% discount to the next round’s valuation. Apollo secured a 1.5x liquidation preference and optional conversion at maturity. The deal reflected FreightFlow’s 112% net dollar retention and 7-month CAC payback, aligning with Convoy’s $150 million convertible note structure. As a result, the note offered flexibility without immediate dilution, supporting a 12.5x ARR multiple valuation.

Executing the Growth Note Strategy

FreightFlow allocated funds to three priorities. First, $50 million enhanced its AI routing algorithms, improving delivery efficiency by 25%. Second, $25 million expanded into Latin America and Asia, targeting 800 new clients. Finally, $15 million hired 200 employees, streamlining operations by 10%. These efforts, powered by convertible debt, aimed for $3 million in cost synergies and $10 million in revenue synergies by 2027.

Why Convertible Notes Drive Logistics Growth

Logistics startups with high growth potential benefit from convertible notes. Here’s why this financing model thrives in the sector.

Offering Flexible Financing Options

FreightFlow’s $90 million note deferred equity valuation, providing runway for growth. For instance, Flexport’s $200 million note enabled scaling without fixed terms. Thus, convertible notes offer strategic agility.

Minimizing Immediate Dilution

The hybrid financing avoided 10% equity dilution, preserving founder control. Like Convoy’s note, this approach maintained FreightFlow’s ownership structure, appealing to early investors.

Attracting Strategic Investors

Apollo’s expertise reduced FreightFlow’s market risks by 15%. Similarly, SoftBank’s $1 billion note in Nuro enhanced investor confidence. As a result, convertible notes draw high-caliber partners.

How Debt-Equity Financing Transformed FreightFlow

The $90 million convertible note reshaped FreightFlow’s operations and market presence, delivering measurable outcomes.

Upgraded AI Routing Platform

The $50 million AI investment cut delivery times by 25%, securing a major retailer contract and adding 5% to ARR. This mirrors Flexport’s note-funded tech upgrades, setting logistics benchmarks.

Extinderea pieței globale

The $25 million expansion added 700 clients in Latin America and Asia within eight months, with localized solutions in Spanish and Mandarin. FreightFlow’s compliance with trade regulations drove 20% revenue growth, akin to ShipBob’s $200 million note-backed global push. Consequently, flexible capital enabled this international reach.

Enhanced Operational Capacity

The $15 million hiring initiative reduced order processing times by 10%, supporting 150 new contracts. This efficiency, similar to Lalamove’s $300 million convertible note outcomes, bolstered FreightFlow’s scalability.

Market Impact of the $90 Million Convertible Note

FreightFlow’s deal influenced the logistics ecosystem, shaping trends and investor behavior.

Boosting Convertible Debt Adoption

The deal contributed to $20 billion in logistics financing in 2025, up 12% from 2024, per PitchBook. Firms like ShipBob adopted convertible notes, accelerating sector growth. Thus, hybrid financing gained traction.

Attracting Investor Confidence

FreightFlow’s 25% valuation increase post-note drew $45 billion in VC to logistics. Investors like Tiger Global, backing FourKites, launched $700 million logistics funds, citing FreightFlow’s $13 million synergy target. As a result, mid-sized startups accessed capital.

Advancing AI-Driven Logistics

FreightFlow’s AI enhancements raised industry standards, pushing competitors like Convoy to invest in optimization. With 55% of logistics firms adopting AI by 2026, per Gartner, this trend is reshaping supply chains, driven by growth note financing.

Lessons for Startups Using Convertible Notes

FreightFlow’s experience offers actionable insights for logistics startups seeking flexible capital.

Optimize Growth Metrics

FreightFlow’s 4.8:1 LTV-to-CAC ratio justified its valuation. Startups should target ratios above 3:1, as ShipBob did, to secure favorable terms. Strong metrics enhance investor trust.

Align Terms with Milestones

FreightFlow’s 3-year term matched its growth timeline. Companies should structure notes, like Flexport’s, to align with funding rounds for flexibility. This ensures strategic timing.

Invest in Scalable Technology

The $50 million AI investment drove efficiency. Startups should prioritize innovation, as Convoy’s note-funded tech did, to maximize impact. Technology drives competitive edge.

Maintain Ownership Control

Non-dilutive financing preserved FreightFlow’s equity. Companies should leverage convertible debt, like Nuro’s approach, to protect founder stakes. This maximizes long-term value.

Ensure Regulatory Compliance

FreightFlow’s trade compliance supported expansion. Startups should address regulations, as Lalamove did, to enable global scaling. Compliance mitigates risks.

Challenges of Hybrid Financing

Hybrid financing poses risks. FreightFlow’s 5% interest payments strained cash flow if ARR growth slowed, a challenge seen in Convoy’s note. Conversion discounts could dilute future rounds, impacting valuations. Moreover, $15 million in hiring costs increased burn rates, potentially concerning investors. Startups must manage these risks to leverage convertible notes effectively.

The Future of Convertible Notes in Logistics

FreightFlow’s $90 million deal underscores convertible notes’ role in logistics. With the market projected to reach $500 billion by 2030, per McKinsey, such financing will grow, driven by AI optimization and global trade. Trends like real-time tracking, as in FourKites’ strategy, will attract investors. As logistics startups scale, flexible capital will fuel innovation and market leadership.

Concluzie

The $90 million convertible note transformed FreightFlow, unlocking $13 million in synergies through AI advancements, global expansion, and operational efficiency. By leveraging strong metrics, aligned terms, and strategic investments, FreightFlow set a benchmark for logistics financing. Its success provides a roadmap for startups, emphasizing scalability, ownership preservation, and innovation. As convertible debt reshapes logistics, deals like this will drive the next wave of supply chain transformation.