What’s gone wrong for Ynsect?

Ynsect operates large-scale vertical insect farms, focusing primarily on breeding and processing mealworms. Its flagship facility in Dole, France, is the largest vertical insect farm in the world, standing 17 meters high and housing around three trillion mealworm beetles.

Using advanced technologies such as automated vertical farming systems, AI-powered monitoring of insect health and growth, and robotic stock management similar to large-scale warehouses, these insects are transformed into various products. These include premium protein powders (used for animal feed, aquaculture and human consumption) and organic fertilisers, which are made from by-products of the insect-raising process. In 2023, Ynsect launched a new brand called Sprÿng, which offers insect-based ingredients specifically for the pet food industry.

An insect farming pioneer

Ynsect's approach aims to address several sustainability challenges, such as reducing land use, greenhouse gas emissions and water consumption and providing an alternative to fishmeal from wild-caught fish stocks.

Ynsect aims to contribute to global food security and sustainability by providing an efficient, nutritious, and environmentally friendly protein alternative.

Since forming in 2011 it has raised a total of $569.39 million over nine funding rounds, making it one of the top venture-growth VC-backed ag and food tech companies to date​.

Ynsect has also received funding from some government-related sources the French public investment bank Bpifrance; Caisse des Dépôts, the venture arm of the French state; and from ‘Programmes d'Investissements d'Avenir’ funds, which are part of a French government programme to support innovation.

But yesterday (September 26) the company said it had filed a safeguard plan after failing to find enough financing for its expansion plans.

It said the safeguarding move will facilitate the reorganisation of the company to allow economic activity to continue, jobs to be maintained and debts to be paid.

It added it was hopeful of finding cash from investors. "Ynsect is in advanced discussions with a number of investors wishing to support and finance this launch phase of its industrial process,” it said in a statement. “The delays inherent in carrying out this fundraising have, however, proven incompatible with the financial pressure suffered by the company.”

The dash for cash

Ynsect's ambitious bet on large-scale insect farming has encountered obstacles. After raising 160 million euros from investors in 2023, Ynsect said it would refocus its strategy on high-margin markets like pet food. It cut its headcount by 70 people, which represented 20% of its workforce, and closed its production plant in the Netherlands.

Speaking with AgTechNavigator,​ Larry Kotch, CEO of insect farming technology company Flybox​ said that mealworms, used by Ynsect, are “plagued by issues” and are less easy to control and predict compared to black soldier flies, which have gained significant attention in recent years due to their usefulness in waste management, animal feed production, and sustainable agriculture.

Ynsect has also encountered first mover issues, he said. He added: “with tech, it's impossible to get a return on capital when the large industrial engineering companies take all the margin. The technology in the industry is all sourced in the EU and we need to look for better value if the industry is to survive and if investors want return on capital.

“Just like in biogas, often the big early players that try to build a massive factory and hoard all the information end up failing. Now the industry is becoming a lot more decentralised with niche companies focussing on their part of the supply chain and locating insect bioconversion plants adjacent or on top of waste sources rather than separate factories in the middle of nowhere who incur massive, up to 40%, of their costs in logistics of feedstock.”

Bad news for French food tech as a whole?

Matthieu Vincent of the consultancy DigitalFoodLab, in a LinkedIn post, expressed fears that the Ynsect news is worrying for the whole French ecosystem. Start-ups in the country, he said, will lose in attractiveness and relevance from the point of view of foreign partners and investors.

But Kevin Camphuis, co-founder of Shakeupfactory, the Paris-based business accelerator and open innovation centre specialising in food and agtech, said “no disruption happens without hurdle and pain, either for the incumbents or for the competitors”.

Ynsect is adding layers of disruption with new breeding technics, new transformation technology, new end usage, he told AgTechNavigator.​ Challenges in terms of consumer, customer, supplier and regulator acceptance are therefore par for the course.

“Even if there may have been some errors, like in any project of that ambition, the story is not finished yet and history will also remember how decisive they have been in making this market emerge," he said.

“It's the dynamics of innovation and it's also emblematic of the dynamics of investment of these past years which may have pushed too hard on too many categories which would have required more time to mature their solutions. 

Neither is Camphuis concerned for ag and food tech in France as a whole. The country has has built “unique” and “incomparable knowhow and leadership” in these categories, he said.

Regulatory overcaution?

Nick Rousseau, founder and MD of the UK Edible Insect Association, blames an overcautious regulatory environment for the failure of the sector to scale to the extent it wishes.

"I am very sad to see Ynsect in difficulties and hope that they can find a way forward,” he said. “They have been major players in the farmed insect protein market and have achieved a great deal which we all respect. 

Around 30 companies have started and closed in the UK since his association started to support the sector back in 2015. Much of this, he says, is due to challenging market conditions rather than anything fundamentally wrong with the proposition.   

“The Regulatory environment in the UK and Europe is, in our opinion, overly cautious based on adverse experiences that have affected the mainstream livestock/meat industry which would be extremely unlikely to apply to insects and this has put considerable burdens on the sector and restricted its ability to take full advantage of the potential of insects to convert biomass into valuable protein.  

“The UK has over 30 innovative companies developing new solutions and approaches and, out of these, there are some extremely strong and credible ones that I am confident will attract investment as they seek to scale up.”