If you’re farming insects for protein, scale is the name of the game, which makes life tough for new market entrants, says Singapore-based startup Insectta. But if you’re mining bugs for higher-value functional ingredients, even a tiny startup can compete on the global stage with the right technology.
“Our original idea back in 2017 was to be a black soldier fly farm for feed and fertilizer,” Insectta cofounder Chua Kai-Ning (CKN) tells AgFunder News (AFN). “But about a year into our journey we realized that this was not ideal in Singapore where land is scarce and overheads are really high. We weren’t playing to our strengths in R&D, pharmaceuticals, and material sciences, and that made us think about how much value we could extract from these insects.”
Hence, the pivot to patented extraction technology for two high-value ingredients: melanin and chitosan, says the firm, which has just raised S$1.4 million ($1.03 million) to expand its pilot plant in a round led by Trendlines Agrifood Fund, with participation from Glocalink SG, Paragon Ventures I and SEEDS Capital.
Melanin, a dark pigment traditionally “extracted from cuttlefish, fungi, or lab-made,” is costly to manufacture, water-insoluble, and “only available in minute quantities,” claims Kai-Ning. Insectta melanin, by contrast, “can be offered in unprecedented quantities. Even at pilot scale we’re offering 200 times more than current industry offerings, with 100% water-solubility, which potentially opens up completely new markets.”
Chitosan, meanwhile, traditionally comes from crustaceans, “which can be polluting, untraceable, and inconsistent in quality,” she claims. “We’re offering a fully traceable sustainably sourced consistent product with no heavy metals.”
AFN: The pivot: Was there a ‘Eureka’ moment?
CKN: We already knew we could extract chitin from the insects’ exoskeleton, but as we were conducting research on that with a grant from the government, we realized we were producing a lot of waste water that was stained tar black, which was costing us a lot of money to treat.
So we got curious, why is this so black? And that’s when we discovered it was being stained by melanin, which is now our second core product, and we were throwing it down the drain.
This led to our proprietary two-step process to extract chitosan and melanin from black soldier flies. Subsequently, we also developed a method to purify the melanin, which we’ve kept as a trade secret, so that the melanin is of nanoparticle size and water soluble.
We’ve achieved two firsts. One, we believe we’re the only company in the world to extract chitosan and melanin from black soldier flies from a single process. And two, we think we’re the only company to extract melanin on a large scale from insects in such a pure form.
AFN: How does your process work?
CKN: We produce five products from black soldier flies: Chitosan, melanin, proteins, probiotics and minerals, although chitosan and melanin are our superhero products.
To get chitosan and melanin, we start with a fermentation of the cocoon shells—not the insect itself—with a strain of bacteria that is also part of our IP. This helps us to take the minerals out. Then we have a two-step proprietary process first to remove proteins, then to remove melanin. After that we put the melanin through our trade secret-protected purification process and we’re left with chitin. This is then converted to chitosan via a deacetylizing process.
The last step, the wastewater treatment, is also pretty novel. We take wastewater from step one and step two and mix it together in a specific ratio. That allows us to extract minerals, proteins and probiotics.
What we’re left with is a wastewater effluent that can be discharged according to Singapore’s discharge regulations, which is pretty cool because we save on wastewater treatment costs and we get three more products to sell.
AFN: What is Insectta bringing to the chitosan market?
CKN: Chitosan has anti-microbial, moisturizing, and anti-inflammatory properties and it’s widely used in pharmaceuticals, cosmetics, anti-microbials, and agritech.
The problem with [the standard] crustacean-based chitosan, is poor traceability and inconsistent quality. Most of it comes from bycatch so you get all different species in there and the color and protein and mineral levels can vary a lot. You can also get heavy metals.
Our chitosan is very consistent in quality and has undetectable toxic heavy metal content, which you can’t even say with medical grade chitosan right now.
For our first target market, which is the personal wellness market, chitosan averages from $50-200/kg, so we can sell for $100, which is mid-range.
AFN: What’s your go-to-market strategy?
CKN: For chitosan we have two routes to market. We could sell direct to manufacturers, cosmetic companies, and supplement manufacturers and we have purchase orders signed with two SMEs here. Another route is to go through distributors.
AFN: How is Insectta disrupting the melanin market?
CKN: Melanin is attracting attention in the organic electronics and biomedical industries for its ability to conduct electricity, heal bones and nerves, and protect against radiation.
The problem with melanin from squid or cuttlefish, fungal and other sources is that it’s very rare and incredibly expensive to produce, so the market price on average is about 1,000 Singapore dollars. It’s also water insoluble, which is hindering its potential. That’s where Insectta comes in, as we can produce it at about 100x cheaper than this.
We are the first company in the world to produce unprecedented quantities of highly functional water-soluble melanin and even on our pilot scale, which is where we are right now, we can produce 210 grams a month, which is phenomenal, given that right now, a bulk order for melanin is a gram or more.
So even at pilot scale, we’re very confident we can supply the market at a competitive price.
AFN: Given the challenges you’ve described above, is there much of a market for melanin?
CKN: Because of the problems I’ve just outlined, it’s a pretty small market at the moment, and the majority of the applications we are exploring are still in research or prototype stage. But a lot of them are very promising. We’re planning to sign MOUs with companies as they continue to progress with their research, prototyping and commercialization.
We believe that with a superior product at a significantly lower cost, that will open up new market opportunities. But of course, we want to see some more immediate returns as a business, so that’s where chitosan comes in. This is a market where we can go in immediately. We have commercial partners that are just waiting for us to scale out. We have letters signed and purchase orders signed.
AFN: Are you an insect farmer and processor or just a processor now?
CKN: We purchase our raw materials from farms in Southeast Asia that produce black soldier flies a lot cheaper than we could in Singapore, but we ensure these farms sell their black soldier fly feed to the EU animal feed market so we are assured of some quality when it comes to raising them.
Our technology and IP is around extraction, so it doesn’t make sense to play further up the supply chain in farming the insects, and we stopped farming in January of this year to make way for our new pilot plant.
This will be operational by late June.
The beauty about our IP is that it is all in the process, so we don’t need highly specialized or customized equipment, so working with contract manufacturers going forward will be a way to keep us asset light.
With this funding round, we can get to the stage where we can take a good look at our process on a pilot scale and then shop around for contract manufacturers that can fit our needs.
AFN: You’ve recently raised S$1.4 million ($1.03 million). What are you spending it on?
CKN: About half a million Singapore dollars is going into completing the pilot plant. The rest is for business development. Trendlines was our sole seed round funder, and when a lot of people were stuck in the mindset that insects are only for animal feed and human nutrition, they saw the potential in other markets.
They took a leap of faith but it paid off because we achieved our patents and we’ve hit our milestones. With the latest round, they have come in again as lead investor. We’ll be looking to do a series A round likely in the first quarter of next year, but our current round gives us a two-year runway.