French insect protein startup Ÿnsect is preparing to sell off parts of its business after failing to secure the funding needed to scale into industrial production, a source close to the company tells Sifted.
The company — which has raised over $600m to date — farms beetles and transforms them into protein ingredients that can be used to create food for animals and humans.
In 2020 Ÿnsect unveiled an ambitious 45k square metre industrial site dubbed Ÿnfarm, designed to produce 200k tonnes of insect protein per year — a costly project the scaleup struggled to fund. In August, Ÿnsect cofounder Antoine Hubert told Sifted that the company needed to secure more funding to bring Ÿnfarm into full production and reach profitability.
In September, Ÿnsect announced that it had entered a ‘procédure de sauvegarde’ (safeguarding proceedings) — a voluntary procedure that occurs when a company is at risk of insolvency — and an administrator was appointed to help reorganise the business. During that time, Ÿnsect’s debts have been frozen and the company has continued to operate normally.
The scaleup needed about €130m to scale Ÿnfarm and put the company on track to reach profitability, according to the same source. It was pitching takeover plans to private equity funds, they said, and found some interest, including one offer from a US fund that “nearly succeeded”.
However the company issued a call for bids one month ago and received no offers by the deadline earlier this week, which was first reported by French publication Les Echos.
“It was a general takeover plan, and €130m is a big ticket that includes the whole company,” says the source. “But there were people who were interested [...] That’s why the next step is another call for bids… But instead of having the whole menu, you can choose à la carte.”
The decision to open a second bid and sell for parts requires approval from a number of stakeholders and has not yet been enacted, although it has the support of the board and the administrator, says the source. If confirmed, bids could open as early as the start of March.
It comes as the company has just a few weeks left of runway, according to the source, after which it will be declared insolvent.
Bug in the system
There are several assets that Ÿnsect could sell, including a small pilot factory located in eastern France and the company’s 440 patents, which it says represent over half of the entire patent portfolio in the industry. If Ÿnsect struggles to sell some or all of its assets, however, some of the company’s workforce will be at risk of losing their jobs. Ynsect currently has more than 200 employees.
If this happened, it would also mean that the debt attached to these assets would be written off. Ÿnsect has raised over €100m in debt, according to this source, from a bank consortium including Caisse des Dépôts (the venture arm of the French state), Crédit Agricole Brie Picardie, and Caisse d’Epargne Hauts-de-France.
There is interest, however, from some of Ÿnsect’s investors to participate in future funding plans, according to the same source. Investors include European VCs Astanor Ventures, Eurazeo and Demeter Partners, public bank Bpifrance, and US investors Upfront Ventures and Footprint Coalition.
Ÿnsect’s has spent the past few months courting potential customers — including Purina, the pet food division of food and drink multinational Nestlé, and petcare company Mars, which owns Royal Canin — the source said.
“They confirmed the insect species and the associated products are what they are looking for. They couldn’t buy large volumes at once but they were ready to purchase,” they said.
“The fundamentals are good… Let’s hope the new bid unlocks funding.”
