We just invested in Ynsect

Why we invested in Ynsect

Today, Ynsect, the first bio-refinery of insects in the world, announced its $15.3m series B, bringing the company’s total funding to $37.7m. We co-led the round, alongside Bpifrance EcotechnologiesQuadia SA and the previous investors also chipped in, including EmertecDemeter and New Protein Capital.

I personally joined the board as Director. Since this is our first public investment and given the growing interest in the alternative protein space, I wanted to take a moment to share why we invested.

Recently, there’s been a lot of buzz around insects as a potential food source. Every week, a new article reviews innovative chefs using insects (Londoners, check out Grub Kitchen!), or discusses a new insect-focused startups (we counted 250+ new start-ups in the insect sector for food or feed uses!). You might have even been forward-thinking enough to taste a grilled cricket!

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Beyond the everyday hype, however, insects have been a major topic of discussion for scientists and food experts for over a decade. In a 200-plus-page report issued in 2013, Edible Insects: Future Prospects For Food And Feed Security, the FAO provided the first comprehensive assessment of insects’ current and potential uses food for humans and livestock, and labelled insects as unexplored nutrition source that can help address global food insecurity. “If we think about edible insects, there’s a huge potential that has essentially not been tapped yet,” said Eva Muller, the Director of FAO’s Forest Economics, Policy and Products Division.“Most [insects] are just collected and there’s very little experience in insect farming”.

So what’s really happening, and why is it worth diving deeper whether you are sensitive to sustainability-oriented topics or not?

The problem

By 2030, we’ll need to feed over 9 billion people, 4.5 billion of whom are part of the growing middle class increasingly adopting meat- and fish-heavy diets. On top of that, it takes a lot of protein to grow a full-sized chicken, cow, pig or fish — producing more animal protein ironically means we need to produce more protein to feed them while they grow! As a result, we’re expecting demand for protein is expected to rise by up to 70% in the next 15 years.

The “Future today”: “A lot, with lots of resources”

To supply this dramatic increase, we’re currently dealing with this in three ways:

1. Expanding modern forms of intensive production for livestockdramatically impacting the environment and human health.

Beyond the well documented environmental consequences of large scale livestock production, public health experts agree that antibiotic use in intensive livestock production create drug-resistant bacteria. Since we are what we eat, these resistant bacteria are then transmitted to humans through food, and spread from person to person. And since genes for antibiotic resistance are transferable to other bacteria of the same or a different strain, we’re setting ourselves up for a world where we’ll no longer have proper medication to resist bacterial infections.

[T]he use of antibiotics in food animal production contributes to increased drug resistance. Approximately 50% current antibiotic production is used in agriculture, to promote growth and prevent disease as well as to treat sick animals. With such massive use, those drug resistant microbes generated in animals can be later transferred to humans.
— World Health Organization, on World Health Day, under the theme ‘Combat drug resistance’, April 7, 2011

2. Overfishing, leading to a global crash in fish stock.

This is due to both increased human consumption and animal feed — with 25% of our global fish catch dedicated to feeding other fish or livestock! At our current fishing rate, it’s possible that we run out of fish in the next 30 years.

3. Draining our soil.

In addition to large scale agriculture for human consumption, 33% of global arable land today is dedicated to animal feed production. That land is mostly split between soybean, legumes and oil crops — all of which require extensive land and water and are draining the soil due to their widespread monocultures.

What’s more: this situation is becoming untenable for livestock growers themselves! As a result of droughts, flooding and soil degradation, the price of soymeal fluctuated heavily and has steadily increased over the past few years. Just in 2016, soymeal was crowned the year’s best performing commodity by Bloomberg, jumping an insane 54%. Fishmeal pricing follows a similar curve, with scarcity taking the price of fishmeal on a roller coaster with a general upward trend. Given that farmers spend 45–75% of their total costs on animal feed alone, price increases — with the price quadrupling on average over the past 15 years — are a pressing challenge.

In short: we have applied traditional strategies and operational shortcuts while we need a new agricultural revolution: “an evergreen revolution,” one that increases food production while ensuring environmental sustainability.

It must go further than reducing agriculture’s negative impacts; ultimately, agriculture must positively contribute to the global environment.
— AgTech: Challenges and Opportunities for Sustainable Growth, Suren Dutia, Ewing Marion Kauffman Foundation, April 2014.

This is where alternative proteins––and insects in particular––come in.

The “Future Positive” : “More and better, but with less resources”

Alternative proteins: growing solutions

Given the challenge that lies ahead of us, interest in alternative protein has grown steadily over the past few years. Sources of alternative proteins range from bacteria to insects, and mycoprotein to artificially-cultured meat. The next generation of proteins, however, will only succeed if it can demonstrate food safety, controlled production costs, enhanced nutritional qualities, scalability and consumer acceptance.

Insects: the hero

Of those solutions, insects have the most potential for three reasons: they’re nutritious, they’re very environmentally-friendly, and perhaps most importantly their market potential is unparalleled.

Incredibly nutritious. Animal proteins and particularly insect proteins perform much higher than vegetable, algae or single-cell protein for animal feed. Insects are packed with protein, amino acids, and fiber. At +70% protein content, they contain more protein than soybean or salmon! It’s no surprise that they’re already present in 20–70% of animal diets in the wild.

Environmentally-friendly. In a nutshell, insects require only 9% of the land usage, 3% of water usage, and 17% of feed usage of other protein sources, and generate 1% of the CO2 output. As you’ll see on the following graph, producing 1kg of crickets — or what you’d commonly eat in a typical 5-person seating — requires a lot less labor and resources than any of our current animal protein sources (geez, those chickens are high maintenance!)

Economic opportunity. Finally, market opportunities for insects are massive and untapped. Insects production at scale can serve at least 6 major markets: animal feed, pet food, human nutrition, plant nutrition, neutraceuticals and green chemistry.

If we just look at the animal feed market — a stunning $400 billion opportunity––insects are incredibly promising. According to the FAO, insect protein “can replace between 25% to 100% of soymeal or fishmeal depending on the animal species” diets with no adverse effects. As Florence V. Dunkel, who works for the UN Edible Insects Advisory Board, said: “This is more than a blip. This is the beginning of a curve that will go steadily up.”

Why Ynsect?

After having read about 40+ companies in the sector and met with 20+ of them traveling from New York to LA to Toronto and London, I ended up meeting Antoine, the founder of Ynsect, in… Paris, a short walk away from my home. Within 20 minutes of speaking with him, I knew this was the opportunity I was looking for. In a few words, Ynsect is a perfect example of a Future Positive company, fully aligned with our elevated definition of value that includes human capital, innovation capital and societal impact beyond financial returns.

1. Human Capital: vision & gravitas

Ynsect has built outstanding human capital with a mission-driven and visionary team. They started R&D five years ago while it was still illegal to sell insect protein in western markets. Antoine himself is exceptional and leader. As the founding president of IPIFF (the International Platform for Insects for Food and Feed) — the foremost industry association working with European institutions, industrial associations, and European Member States to evolve legislation in the space — Antoine travels the world to promote the insect sector. Him and his co-founders, Jean-Gabriel Levon, Fabrice Berro and Alexis Angot, are perfectly complementary with 20+ years of experience in insect farming, manufacturing, energy and finance.

2. Innovation Capital

In addition to operating Ynstitue, the largest private research center in the world in the field of insect protein, this team owns the largest patent portfolio in the sector. Leveraging their extensive experience in agro, robotics, and software, Ynsect developed a suite of proprietary robots to fully automatize all operations (feed supply, tray cleaning, dead and grass removal, separation etc.) and high performance sensor-based software that measures over 100+ parameters to simulate and predict productivity. This combination makes Ynsect the only company in the world to possess the know-how to provide insect protein at scale.

3. Financial value

Better quality, proven scalability, R&D pioneer, exceptional team, better unit economics: as a result, 100% of their volume for the next two years is already pre-sold!

Despite having built the capability to produce at scale over 12 insect species, the team is very focused on the most significant market opportunity: producing mealworm beetles for the fishmeal market.

Generally, scientists talk about two main species of insects for scaled production: the Black Soldier Fly and the Mealworm Beetle. After rigorous testing, it occurred to us that mealworm beetle holds the most potential:

In fact, our early tests show that substituting 100% of fish meal by Ynsect’s #1 product showed a 30% increase in body weight in the fish population, and a 18 % decrease of FCR — at a very competitive cost and pricing (vs. fishmeal)

And the timing is just about P.E.R.F.E.C.T.

This announcement couldn’t be more opportune: the EU Commission voted yesterday to open the aquaculture feed market to insect-derived protein from July 2017 onwards. A game-changing move for the industry, the decision was influenced in large part thanks to Antoine’s work at the IPIFF.

The future is looking good (green?) for Ynsect and the visionary team leading this company: real “rockstars” in our opinion ;)

 

 

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