With the insect ag industry littered with the corpses of startups who found out the hard way that scaling biological systems is not as easy as it looks, Spanish startup InsectBiotech is painfully aware of the challenge ahead. But a couple of key factors are working in its favor, says the firm.
Formed by Tobias Webb, Ignacio Gavilan, and Ben Brown in 2022, InsectBiotech realized pretty quickly that the unit economics of farming black soldier fly larvae (BSFL) for protein, oil, and frass, only make sense if you can “solve two big problems: feedstock and energy,” Webb tells AgFunderNews.
“It hit Ben when he was driving through Andalucía [in southern Spain]. He rang me up and said, I’ve figured it out. There’s a huge amount of olive waste [pomace left over after olives are crushed for oil], and endless solar energy, giving us both feedstock and low energy costs in a region of Spain that really needs jobs, factories and investment.”
Olive pomace
While several players at that time were arguing that the future of insect ag lay in vast, highly-automated—and very pricey—facilities that look like Amazon warehouses, Webb, Gavilan, and Brown started running the numbers and concluded that a lower-tech, medium-sized facility making 2,000 tons of protein and 4,000 tons of frass (insect waste that can be used as a soil amendment) powered by renewable energy made the most sense for InsectBiotech.
“Andalucía produces the largest amount of olive pomace residue in the world in one place, 4.8 million tons of it a year, but everyone we spoke to said we couldn’t use it as a feedstock. But we found a low-cost way of using green chemistry to make it digestible, and it worked.
“Since then we’ve been running tests at two small factories [shipping containers]; one at the University of Granada with half a dozen scientists working in it, and the other at an olive mill in Andalucía called Casa Grande, where we have been testing our lab results in real world conditions for 18 months.”
“The whole focus is about getting the best [feed] conversion ratio, right, and we’re pretty convinced we can do 90%+ olive pomace for a scaled factory feedstock, which means we can operate, at some estimates, at seven times less cost than some other players in the space.
“And as well as being low cost, it’s also pretty consistent, which is really important if you want a consistent product at the other end. The BSFL oil, meanwhile, is also higher in oleic acid than lauric acid because we’re using olives.”
The fact that others have since have started exploring pomace as a feedstock helps validate InsectBiotech’s approach, said Webb, citing the OLIFECycle project (announced late last year), a collaboration between Barcelon
Second-generation insect ag
Stepping back, says Webb, players entering the insect ag space today benefit by being later to the game, as pioneers in the space have had to build the plane while flying it. The second wave of players can learn from their mistakes and work with firms that have built up specialist expertise in areas from breeding and genetics to infrastructure.
“If you try to build a factory from scratch, that was where the first generation struggled; they spent so much money on engineering and design,” he adds. “Whereas now you can go to a company such as Better Insect Solutions (part of Big Dutchman, a leading supplier of equipment and feeding systems for pig and poultry production) and say, go build us a 2,000 ton facility.”
There are also companies such as FreezeM and Nasekomo supplying neonates (baby BSFL) to insect farmers in a state of suspended animation, enabling companies with less expertise in entomology to partially or fully replace their breeding operations and focus on farming and processing, he notes.
As for energy, he says, “In Andalucía, we think we can get between 80-100% of our power needs through solar, so that’s a massive cost reduction. The other factor is the temperature here, which is the close to the ambient temperature BSFL need, which is quite high. So we don’t have to do heating although there will be some cooling needs in summer.”
Like most players in the insect ag space, InsectBiotech sees the most potential in aquaculture and petfood in the near term and is currently under NDA “with two of the largest pet food companies in the world” keen to explore alternative protein sources, claims Webb.
“They’ve told us exactly what they want and how much it should cost if we want an offtake agreement, so we know what we’re aiming for. We’ve also been doing loads of trials with vineyards, raspberries, strawberries and other high-value agricultural products testing our frass as a soil amendment.”
The investment landscape
That said, the funding climate for insect ag is challenging, both due to the highly-publicized woes of some of the largest players in the space from Agriprotein and Ÿnsect to Agronutris, Aspire, Beta Hatch, Enorm Biofactory, and the association with vertical farming, another sector that has also overpromised and underdelivered for many investors, concedes Webb.
“We’ve got some pretty good connections between us through all of our years in the industry and we’ve secured about €1.5 million ($1.7 million) in seed money, which is funding our trials, and we’re now looking for the anchor investor for our next round, which gets us that first factory.”
Corporate money, he says, may come in come in later, as we have seen with firms such as Protix and Innovafeed, which have attracted financing from big names such as Cargill, ADM, and Tyson.
‘We first have to show that our model works in Spain’
Longer term, he says, the aim is to build a series of facilities next to olive mills in the region. “There’s lots of land available and then the road goes up to Madrid, and there are pet food factories just north of Madrid.
“Plus there’s a lot of aquaculture in Spain, which has actually become a hot spot in Europe right for investment. There’s also a lot of interest in regenerative agriculture and soil health here, which is generating interest in our frass. And then there are also non-dilutive funds that we can tap into.”
He adds: “Portugal is probably where we would look to next. With olives, there’s only a certain number of countries that grow them. Spain is by far the biggest, but North Africa is also a massive opportunity, so we’ve been talking to the Moroccan government and Portuguese investors and others about how we might expand.
“But we can’t lose our immediate focus,” he stresses. “We first have to show that our model works in Spain and can deliver a consistent product at scale. That’s what the big companies are all saying to us, because they have dealt with some insect ag companies that have were not able to supply them with a consistent product.”
Funding rounds in insect agriculture, 2024 (US dollars):
- Entosystem (black soldier flies, Canada): $42 million
- Protix (black soldier flies, Netherlands): $40 million
- Tebrio (mealworms, Spain): $32.6 million
- FreezeM (black soldier fly neonates for breeding, Israel): $14.2 million
- Nasekomo (insect ag franchisor, black soldier fly neonate supplier, Bulgaria): $8.7 million
- Entocycle (enabling tech for insect ag, UK): $2.6 million
- Oberland Agriscience (black soldier flies, Canada): Undisclosed
Source: AgFunder data [disclosure: AgFunder is the parent company of AgFunderNews)
Further reading:
Distressed insect ag firm Ÿnsect secures bridge loan, receives offer for pilot plant
Brief: Aspire raises “meaningful amount” to keep insect ag operation going
