A Product Portfolio

Insects are mostly farmed to harvest the protein as well as the oils and fats they produce. They can compete with other sources of protein, such as fish meal, and their composition may even outperform in specific feed and food applications. But like livestock farming in general, to be successful as an insect company it is important to valorize the whole larvae, i.e. the innards as much as the skins that are shed as the animal grows. Industry players are thus required to develop a product portfolio with differentiated product offerings and benefits for different applications (see inset).

For example, the high-protein content insect meal can be used for aquaculture feed, while less refined protein pulp (essentially an insect puree) is suitable for pet food, and live larvae can be fed to chicken – with the added benefit of stimulating the natural hunting-and-gathering behavior, which contributes to their welfare

Insect Derivatives and Applications

At first glance, one would not suspect that frass is a major (by) product that needs to be put to good use to contribute to insect farming economics. The material consists of a mixture of excrements derived from the growing insects, the feeding substrate, parts of farmed insects, as well as dead eggs and insects of no more than 5% in volume and 3% in weight. Opportunely, frass has been found to be a highly valuable fertilizer, with visible benefits on plant health and development due to the antimicrobial activity associated with it – which could aptly stimulate a circular bioeconomy even more.

Driven by Regulation
Any new feed or food source making it into the market must pass regulatory approval, and insects are no exception. Insect farming is considered an agricultural activity, which means they fall under the scope of EU agricultural rules (e.g. EU organic legislation, rural development programs under the Common Agriculture Program). Also, insects farmed in the EU for the production of food, feed or other purposes are considered ‘farmed animals’, covered by Regulation (EC) No 1069/2009 on Animal by-Products, among others.

For the past ten years, the International Platform of Insects for Food and Feed (IPIFF) has lead the effort to establish the necessary regulatory conditions to help its members – current and prospective insect producing companies – become commercially viable. “International standards have been developed to encourage local authorities to implement them,” says Christophe Derrien, Secretary General at IPIFF.

Christophe: “IPIFF has directed the majority of their efforts towards unlocking regulatory barriers to maximize bioconversion of waste-related products under safe and sustainable conditions.” Owing to their experience with Mad Cow Disease, the EU has proven particularly strict in this area, in the sense that it is very hesitant to approve the feeding of animal waste to livestock.

Animal Feed vs Human consumption
Although insect farming is still in its early stages, growing numbers reveal that most of the insect meal produced will be used for livestock and fish feed. And growth can be rapid. IPIFF has forecasted that, by 2030, more than 10% of fish servings consumed in the EU could be derived from fish farms using insect protein in their feed, that 1 in 40 eggs consumed in the EU could be derived from insect-fed laying hens, and 1 in 50 chicken-meat servings could be derived from insect-fed broilers. This would suggest an attractive growth path ahead.

The most superior application may well be the use of feedstock for aquaculture: Fish feed. Boasting excellent nutritional value and amino acid profile as well as antimicrobial activity, leading to very efficient growth rates, for example in salmon, the aquaculture industry would hugely benefit from reducing its reliance on fish meal – which contributes substantially to overfishing our oceans – and switch to insect meal. Despite 99% of insect produce being sold into feed applications, it is the (potential) production of insects for human consumption that always attracts a lot of attention. Indeed, from a functional perspective, insect-based protein is an excellent alternative to traditional choices such as meat and soy, with added benefits on health beyond performance. It has proven to be a complete food source, naturally high in protein, minerals, vitamins, fiber and Omega 3 & 6 – all of which would contribute to a healthy diet.

Maturing an industry
Inspired by processes occurring in nature, insect farming provides solutions to key European and global challenges, such as food waste, reliance on food imports, and feeding a growing population while limiting the expansion of agriculture – potentially a veritable cornucopia. Indeed, we are currently seeing a true mushrooming of insect start- and scale-ups across Europe and the globe. Or, as one industry observer would say “Every region seems to have its own insect start-up.”

At ECBF we keep track of the various investment opportunities, and have identified well over 25 notable players. That said, the industry is being led by a much smaller number of potential leaders, among which rank Ynsect and InnovaFeed from France, and Protix from the Netherlands. Most recently, ECBF together with BNP Paribas, has made a strategic investment in Protix.

With the industry on a path to maturity, ECBF has identified four key attention points for investors and entrepreneurs alike. First, the ambitious industrial roll-out strategies that are being proposed inherently risk delays and significant cost overruns – which should be mitigated by keen management as well as spare capital. Next, the holy grail for the industry is to achieve pricing parity with fish meal, as this would turn insect meal into a robust, high-volume product – but it is not clear that all players and insect species can achieve such low-cost position. Thirdly, there is the question of differentiation between so many different start- and scale-ups, many of which are focusing on the same BSF species. One should ask if there is room to differentiate, or whether these players can prosper alongside each other in their own region – at least, until the inevitable consolidation takes place. And finally, there is the issue of securing large amounts of feedstock (often >400 kilotons per year) via partnerships, to build the mega-plants needed for scaling up and to secure a profitable, low-cost operation.

As the first venture fund exclusively focused on circular and bio-based industries in Europe, ECBF believes in the potential of the insect industry. It can bring to market a novel protein source which contributes meaningfully to circularity, to reducing carbon emissions, and to generating favorable financial returns along the way. We seek to be a significant financial vehicle and partner for entrepreneurs looking to unlock and accelerate economic potential of the Circular Bioeconomy in Europe, and help create a better and healthier future for everyone.

For questions and comments, please refer to:

Cornelia Mann, Marketing & Communications
cornelia.mann@ecbf.vc

Eugen Kaprov, Associate
eugen.kaprov@ecbf.vc

Peter Nieuwenhuizen, Founding Partner
peter.nieuwenhuizen@ecbf.vc