March 17, 2017

Hexafly, an Irish biotech startup founded by three 26-year-old university friends – Alvan Hunt, John Lynam, and Patrick McGarvey – has secured a second round of funding totaling €1 million (US$1.07 million) to scale up their insect farming operation.

In the beginning

After two years of trials, the trio developed a scalable method of insect breeding and was chosen as one of 13 biotech companies selected for the SOSV-backed 2016 IndiBio EU accelerator program. Under the program, Hexafly was given access to mentorship, guidance, and funding totaling €100,000.

The seed funding was used to fund a 3,000-square foot pilot production facility in Ireland’s County Meath where the Hexafly team began to develop the production processes for insect-based oil and protein for use in fish and animal feed ration formulations; chitin – part of the insects’ exoskeleton – which is a biopolymer that is used in food production, medicines, and cosmetics; and frass, a compound plant fertilizer that is sold in liquid form.

Each of the 70,000 adult insects being managed by Hexafly lays between 500 and 800 eggs which are incubated until they mature into larvae – at which time they are then fed on waste vegetation, according to Farmers Journal.

Targeting their business toward disrupting the animal feed industry was not a random decision. The Farmers Journal reports that the EU aquaculture feed market is worth €4.3 billion (US$4.62 billion), the chitin market is valued at €56 billion (US$60 billion), and the EU plant fertilizer market is worth €670 billion (US$720 billion).

“We saw very little innovation in the agtech scene in terms of feed,” Hunt told the Journal. “The same feed sources have been used for decades; there has been very little change.”

Scaling Up

Buoyed by the EU Commission’s approval of insect-derived protein for inclusion in aquaculture feed rations on December 13, 2016, European startups in the space, including Hexafly began to double down on plans for expansion.

This latest round of funding will be used by the company to fund its growth strategy, and the opening of a new 25,000-square-foot production facility later this year. Initially the company plans to license its intellectual property, its methodology and processes, while increasing output. However, longer term plans include rapid expansion of both the company’s output and geographic footprint in Europe and abroad into China and West Africa.

“Our plan is to establish three scaled up plants in Ireland and one in the UK in the next three years,” Hunt told Feed Navigator. “With this latest round of funding we have the investment to do this and we are confident the demand is there.”

“We are developing partnerships in Nigeria and China,” continued Hunt. “China in particular offers huge potential as it accounts for two thirds of global aquaculture production and the Chinese government is prioritizing food security.”

The Field is Abuzz

Indeed, the need for innovation and the approval of insect protein in aquaculture feed by the EU Commission are drawing entrepreneurs and investors into the space of insect farming.

In December 2016 Paris-based Ynsect, a mass-scale breeder and producer of insects for the livestock, pet, and fish feed markets,  raised $15.2 million through a Series B led by Future Positive Capital, Quadia SA, and Bpifrance Ecotechnologies, and which included existing investors, Emertec, Demeter, Vis Vires New Protein Capital, and Business Angels.

This round brought the company’s total raised funding to $37 million over the past three years – the largest investment in the sector to date.

Ynsect plans to use the capital to fund the expansion of capacity at Ynsite, its facility in Jura, France, and to undertake the initial stages of engineering for a large-scale production facility that will have the ability to produce 20,000 tons of insect protein per year.

In January of this year, NextProtein, another Paris-based producer of animal feed components and biological fertilizer from insect larvae, raised €1.3 million in a funding round featuring Kima Ventures, along with angel investors – Jerome Lecat, Khaled Helioui, (who also backed Uber and Deliveroo), Sylvie Ganter, Christophe Cervasel, and participants from the Anaxago financing platform and AngelSquare.

In March of last year, Intrexon Corp. announced that it had entered into a joint venture agreement with Darling Ingredients, the largest publicly traded developer and producer of sustainable natural ingredients in the world, for the industrial-scale production of non-pathogenic black soldier fly (BSF) larvae for use as a protein source in animal feed.

Additionally, Intrexon announced the acquisition of EnviroFlight LLC, a developer of proprietary technologies for the raising of BSF larvae on a commercial scale.

-Lynda Kiernan

Lynda Kiernan is Editor with GAI Media and daily contributor to GAI News. If you would like to submit a contribution for consideration please contact Ms. Kiernan at lkiernan@globalaginvesting.com.