You can tell that the public is captivated by a particular food, when its mere existence on a menu makes the news. Insects are one such ingredient. Cricket ice cream, cricket granola, cricket meatballs, cricket bars, cricket pasta, cricket chips, silkworm chips mealworm burgers, and fruit fly oil have all made headlines all over the world.
Insect farming is frequently touted as a more sustainable alternative to animal protein, particularly as the quality of the protein insects offer is actually quite high. According to the Food and Agriculture Organization of the UN (FAO), “insects have a high food conversion rate, e.g., crickets need six times less feed than cattle, four times less than sheep, and twice less than pigs and broiler chickens to produce the same amount of protein.” Further, insects require very little land or energy to produce, and they can be produced all year round.
Insects for Human Food
Crickets, fruit flies, grasshoppers, and mealworms are all being cultivated for use in consumer food products. Grasshopper farms like Israel’s Hargol says they are racing to increase the production capacity of their operations as demand for this alternative protein is higher than current supply.
As a source of human protein, nutritionists and environmentalists agree that insects are a no-brainer. But the potential for insects to provide an alternative source of food for animal agriculture might be even more significant.
Insects for Animal Feed
The FAO estimates that commercial animal feed production will need to increase by 70% by 2050 to meet the growing demand for protein. Currently livestock and farm-raised fish feed on a mix of pasture, corn, soy, wild fish and other grains, which represent around 60% to 70% of a producer’s costs, according to FAO.
Developing sustainable aquaculture systems, in particular, is becoming increasingly critical as the World Bank estimates that by 2030 nearly two-thirds of seafood will be farm-raised, creating an aquaculture feed market worth around $100 billion, according to analysts. The hard truth of aquaculture is that farmed fish are often fed wild, “forage fish” in the form of processed fishmeal.
A third of global wild fish harvest goes towards fishmeal but with global stocks of wild fish declining, and some sources pointing to the crash in some forage fish populations, this is an unsustainable source of food for farm-raised fish long-term, even with increasingly sustainable practices employed by the fishmeal and fish oil industry.
Insects are a natural diet for many fish but can also provide the high levels of protein livestock farmers want for their cattle to promote animal growth.
Tech Advancement (& Investment) Needed
There’s a long road ahead to realize the possible environmental benefits that could come from insect consumption gaining marketshare in either human or animal nutrition. Technological advancements are necessary to scale the production of insects to a place where the critters could compete with existing sources of food, and there are a few insect farming startups claiming to have very high-tech operations using robotics, to create automated insect farming factories.
These operations are capital intensive and will require significant investment before we can expect to see the widespread adoption of insect-based foods and feed.
Investors are slowly waking up to the potential for the sector although funding levels have remained muted; since 2014, insect products and farming operations have raised $124 million. Of this, $4.2 million has gone to companies creating consumer products for human consumption; the rest went to insect farming operations.
Notably the investors in this year’s deals are largely European firms, many of them impact investors such as the Netherlands’ Aqua-Spark, UK’s Future Positive Capital, and France’s Bpifrance Ecotechnologies.
In the Mid-Year AgFunder AgriFood Tech Investment Report, insect farms fall into the category of Novel Farming Systems along with indoor farms, aquaculture, and home-based consumer systems using the technology of any of the above. For the first six months of this year, insect farms raised $51 million, which represents 26% of the Novel Farming Systems’ total $198 million raised.
Who are the Leading Insect Farming Startups?
The best funded insect farming startups in the last three years are Dutch black soldier fly startup Protix, South Africa’s AgriProtein, and France’s Ynsect.
Protix, a Netherlands-based company, raised €45 million ($50.5 million) in equity and debt funding in June, marking the largest investment in the industry to-date, according to AgFunder data. Dutch food and agriculture bank Rabobank invested in the round alongside Aqua-Spark, the sustainable aquaculture investment fund, Dutch government-backed Brabant Development Agency (BOM) and other private investors. Protix farms insects predominantly for animal and aquaculture feed, with feed products in over 12 countries, ranging from pig and poultry to pet food specialties.
The company is also moving into the food sector. Protix recently acquired Fair Insects, a consortium of breeders growing mealworm, crickets, and locusts. According to Protix, the acquisition will allow the company to serve a wider spectrum of customers from B2B to food markets with protein-rich foods, meat replacements, and health beverages.
AgriProtein, a South African startup growing insects for animal feed using waste, raised a $17.5 million Series A round from strategic investors in Europe, North America, and Asia in December 2016.
At the time, the company was valued at $117 million and brought the companies fundraising to date to $30 million. Nearly a year later, this is the second largest venture deal for an insect startup.
In the third position is France’s Ynsect, which raised $15.2 million in Series B funding from a range of global investors just one month before AgriProtein.
Ynsect farms mealworm for use as a fishmeal replacement in fish feed and has now raised a total of $40 million. UK impact investment firm Future Positive Capital and Bpifrance Ecotechnologies led the round, with participation from Quadia Capital, Emertec, Demeter Partners, VisVires New Protein, and Business Angels.
The largest raise for an insect product intended for human consumption went to cricket bar Exo Protein. The startup raised a $4 million Series A round in early 2016 led by AccelFoods, an early-stage venture capital firm focused on food and beverage companies, with participation from existing investors Collaborative Fund, author, and entrepreneur Tim Ferriss, and Start Garden. The Series A round followed a $1.6 million seed round in October 2014.
There have been a handful of sizeable deals in the last few years, but larger deals are few and far between. One thing we can be sure of is that the lack of robust activity is not due to a lack of startups out there. Mike Velings of Aqua-Spark, a sustainable aquaculture investment fund told AgFunderNews upon announcing the Protix deal that he had surveyed 45 insect farming startups all over the world. The farms are out there, but so far the deals have been slow to materialize.
Have thoughts on why insect farming investment isn’t picking up more steam? Email firstname.lastname@example.org.