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Introduction to Ÿnsect’s Demise
French startup Ÿnsect, which rose to fame after being touted by “Iron Man” star Robert Downey Jr. on the “Late Show” during Super Bowl weekend 2021, has been placed into judicial liquidation due to insolvency. The company’s failure is not entirely surprising, given its struggles over the past few months. However, it is still intriguing to explore how a startup that raised over $600 million, including investments from Downey Jr.’s FootPrint Coalition, taxpayers, and many others, ultimately ended up in bankruptcy.
Understanding Ÿnsect’s Business Model
Ÿnsect’s primary focus was not on producing insect-based protein for human consumption, but rather for animal feed and pet food. The company’s indecision about which market to prioritize led to a lack of clear direction. In 2021, Ÿnsect acquired Protifarm, a Dutch company that raised mealworms for human food applications, adding a third market to the mix. However, this acquisition did not yield the desired results, and the company struggled to generate revenue.
Revenue and Financial Struggles
According to publicly available data, Ÿnsect’s revenue from its main entity peaked at €17.8 million in 2021, which is approximately $21 million. However, this figure was reportedly inflated by internal transfers between subsidiaries. By 2023, the company had racked up a net loss of €79.7 million, which is equivalent to $94 million. The company’s financial struggles were exacerbated by its inability to generate significant revenue from its main markets.
The Role of Impact-Focused Investors
Ÿnsect attracted impact-focused investors like Astanor Ventures and public investment bank Bpifrance, which bought into the company’s compelling sustainability vision. The pitch was simple: offering an alternative to resource-intensive proteins like fishmeal and soy. However, this vision collided with market reality, as animal feed is a commodity market driven by price, not sustainability premiums.
Market Reality and the Failure of Ÿnsect
The company’s failure can be attributed to its inability to adapt to market reality. Factory-scale insect production typically relies on cereal by-products that are already usable as animal feed, making insect protein an expensive extra step. For animal feed, the math simply wasn’t working. Ÿnsect eventually recognized this and refocused its strategy on pet food and other higher-margin segments. However, this pivot came too late, and the company had already committed to a massive, capital-intensive bet that would ultimately doom it.
Lessons from Ÿnsect’s Demise
Ÿnsect’s struggles are not a mystery and are not mainly about insects. They are the result of a mismatch between industrial ambition, capital markets, and timing, compounded by some execution and strategy choices. The fact that Ÿnsect failed does not mean the entire insect farming sector is doomed. Competitor Innovafeed is reportedly holding up better, in part because it started with a smaller production site and is ramping up incrementally.
A Broader European Problem
Ÿnsect exemplifies a broader European problem, according to Professor Joe Haslam, who teaches a course on Scaling Up in the MBA Program at IE Business School. “Ÿnsect is a case study in Europe’s scaling gap. We fund moonshots. We underfund factories. We celebrate pilots. We abandon industrialization.” This problem highlights the need for Europe to support industrial startups and provide them with the necessary resources to scale up.
For more information on Ÿnsect’s story and the lessons that can be learned from its demise, read the full article Here
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