Insects for animal feed startup Beta Hatch raises $3m Series A1

Since insect protein became a buzzworthy segment a few years ago, the space has seen a number of startups creating innovative ways to use bugs for food from protein bars to animal feed.

“This is a huge market opportunity,” Virginia Emery, CEO and founder of Washington-based mealworm protein startup Beta Hatch, tells AFN. “In North America we are the largest mealworm producer and the second-largest feed factory behind EnviroFlight. It’s still extremely early in the development of the industry and demand far exceeds supply.”

The startup has raised a $3 million Series A1 funding yesterday co-led by Cavallo Ventures, Wilbur-Ellis’ venture capital arm, and early-stage venture firm Innova Memphis. The round also included investments from Klein Private Equity Investment and Brighton Jones Investment Partners. This follows a 2018 $2.1 million seed round.

Beta Hatch began the raise las Fall and expedited the close of the first part of its Series A to stay ahead of any pandemic-related hiccups. It also swapped its headquarters in Seattle for a rural town in Washington last year to take advantage of cheaper operational costs and better access to agricultural clientele.

Founded in 2015, Beta Hatch develops insect-rearing technology that converts organic waste directly into high-value proteins, oils, and nutrients for poultry and aquaculture, enabling insects to cost-effectively meet the global scale of demand for plant and animal nutrients. 

“We are very much a feed ingredient manufacturer. Our focus is on selling to customers like feed manufacturers who blend ingredients and work with existing brands,” Emery explains. “One company we work with who sells whole dried insects for backyard birds has seen a 400% increase in business due to the pandemic and everyone buying backyard chickens.”

To put the supply-demand situation into perspective, Emery recalls an aquaculture customer telling her that its monthly demand exceeds the annual global production of insect protein. 

It’s no surprise then that Beta Hatch is looking to shed its existing exoskeleton in pursuit of something bigger. It’s using the funds to construct what Emery describes as a major milestone for the startup: a 30,000-square-foot flagship facility in Cashmere, Washington, that it claims will be the largest mealworm production facility for animal feed in North America. At full capacity, it will produce a ton of insect protein per day. Beta Hatch hopes to cut the ribbon in early 2021 while powering the facility in part by waste heat from a neighboring data center to cut down on electrical needs.

Beta Hatch also recently completed what it describes as the first published assembly of the yellow mealworm genome. It will be published as part of an open source article in the Journal of Insects as Food and Feed during Summer 2020.

Insects as a protein source is not a novel concept. Other startups are also keen on the idea of swapping out some existing protein ingredients for insect-derived alternatives. Canadian insect farming startup Enterra claimed the title of running the world’s largest insect farm in 2018. It produces black soldier fly larvae for pet food for dogs, cats, exotic fish and birds, as well as fish in aquaculture including salmon, trout and arctic char, and in poultry, feed for chickens raised at home as well as broilers raised on a commercial scale. 

AgriProtein, which raised $105 million in 2018, is building insect factories across the Middle East, Asia, and South Africa while French Insect farming startup Ynsect closed a $125 million Series C last year. The Netherlands-based Protix is also creating animal and aquaculture feed from insects with feed products in over 12 countries so far.

Big-name companies are also joining the race for new and different feedstuffs. Cargill made an investment last year in White Dog Lab’s single-cell protein, ProTyton, that’s produced with fermentation with a corn feedstock. The substance provides aquaculture producers with a fishmeal alternative. ProTyton will be ready to ship in 2020, according to Cargill. It plans to begin offering the alternative in salmon feed, possibly expanding to shrimp and other species as White Dog Labs’ production volume increases.

“One of the things that’s different about Beta Hatch and the reason we are focusing on a smaller scale operation is our hub and spoke approach to production. It’s more capital efficient. The new facility is key to scaling our supply chain. There is a lot of renewed interest in our model because of the pandemic. It has highlighted supply chain weaknesses,” Emery explains.