How reality crushed Ÿnsect, the French startup that had raised over $600M for insect farming

Ÿnsect, a French startup specializing in insect farming, once captured significant attention when Hollywood star Robert Downey Jr. endorsed it on a popular talk show during Super Bowl weekend in 2021. Fast forward nearly four years, and the company has entered judicial liquidation due to insolvency, a turn of events that many industry watchers anticipated. The downfall of Ÿnsect raises critical questions about how a startup can collapse despite securing over $600 million in funding from various sources, including Downey Jr.’s FootPrint Coalition and public investment from taxpayers. While the company aimed to transform the food supply chain with insect-derived protein, it struggled to maintain a clear market focus. Instead of prioritizing human consumption, Ÿnsect directed its efforts towards producing insect protein for animal feed and pet food, two markets with distinct economic profiles that often left the company in a state of indecision. In 2021, Ÿnsect expanded its portfolio by acquiring Protifarm, a Dutch firm specializing in mealworms for human food. Despite this strategic move, former CEO Antoine Hubert acknowledged that human food sales would take years to contribute significantly to revenues. "We still see pet food and fish feed being the largest contributor to our revenues in the coming years," Hubert stated at the time, indicating the company’s ongoing challenges in generating immediate revenue growth. Revenue woes plagued Ÿnsect, which reported a peak revenue of €17.8 million in 2021—an amount later found to be inflated due to internal transactions. By 2023, the company faced a staggering net loss of €79.7 million. This raises the question of how a company with such limited revenue could attract substantial investments. The answer lies in a sustainability narrative that appealed to impact-focused investors like Astanor Ventures and Bpifrance, who believed in offering alternatives to resource-intensive proteins like fishmeal and soy. However, this idealistic vision clashed with the realities of the animal feed market, which is largely driven by price rather than sustainability. In theory, insect farming could create a circular economy by utilizing food waste; in practice, it often relied on cereal byproducts already suitable for animal feed, complicating the cost-benefit equation. Recognizing this mismatch, Ÿnsect shifted its focus to pet food, a sector less affected by price volatility and more amenable to insect protein. However, by this time, the company had already committed to a massive and costly venture: the construction of Ÿnfarm, touted as the world’s most expensive insect farm. This facility consumed hundreds of millions in funding without a proven business model or clear economic viability. To navigate this transition, Ÿnsect appointed Shankar Krishnamoorthy, a former executive from the energy sector, as CEO after Hubert’s departure. Despite attempts to cut costs by shutting down an acquired production plant, the fundamental issues remained unresolved. Industry experts, including Professor Joe Haslam, argue that Ÿnsect's struggles stem from a disconnect between grand industrial ambitions, market realities, and strategic choices. While Ÿnsect’s failure may raise concerns about the future of the insect farming industry, competitors like Innovafeed appear to be faring better by starting with smaller production facilities and scaling gradually. This situation highlights a broader challenge within Europe’s startup ecosystem, as echoed by Professor Haslam, who points out a tendency to fund innovative projects while neglecting the infrastructure needed for successful industrialization. The collapse of Ÿnsect serves as a cautionary tale, reinforcing the need for comprehensive support systems for deep-tech startups in Europe.