The Rise and Fall of Ÿnsect: A Cautionary Tale of Enterprising Scaling in Europe
Ÿnsect, a French startup aiming to revolutionize protein production with insect farming, recently filed for bankruptcy. This collapse isn’t simply about bugs; it’s a stark illustration of the challenges facing ambitious deep-tech companies in Europe. Let’s delve into what happened, the lessons learned, and what it means for the future of insect-based protein.
From Farm to Factory: The Initial Promise
Initially, Ÿnsect focused on producing insect-based protein for animal feed. The company garnered significant attention and funding, fueled by the growing demand for sustainable protein sources. However, the market proved slower to develop than anticipated.
In 2023, Ÿnsect attempted a pivot towards the pet food market, hoping to find quicker revenue streams. Regrettably, this strategic shift came too late to alter the company’s trajectory. Hubert, the former CEO, acknowledged the difficulty in achieving profitable margins at the time.
The Giga-Factory Gamble
The core of Ÿnsect’s downfall was a massive, capital-intensive project: Ÿnfarm, a “giga-factory” in northern France. Billed as the world’s most expensive bug farm, the facility consumed hundreds of millions in funding.
This investment was made before Ÿnsect had fully validated its business model or established sustainable unit economics. Essentially,the company built a massive production capacity without a guaranteed market.
To lead the launch of Ÿnfarm,Ÿnsect brought in Shankar Krishnamoorthy,a former executive from the energy giant Engie. Following the failed pet food pivot, Krishnamoorthy ultimately replaced Hubert as CEO.
Scaling Challenges and a Fundamental Problem
Ÿnsect subsequently shut down a smaller production plant acquired from Protifarm and implemented job cuts. However, closing one facility couldn’t address the fundamental issue: operating a massive giga-factory designed for a market that wasn’t ready.
Professor Joe Haslam of IE Business School succinctly summarized the situation. He stated that Ÿnsect’s struggles aren’t about insects themselves, but a mismatch between industrial ambition, capital markets, and timing, compounded by strategic and execution errors.
A Sector Still Alive: Innovafeed’s Approach
Despite Ÿnsect’s failure, the insect farming sector isn’t necessarily doomed. Competitor Innovafeed appears to be navigating the challenges more successfully.
Innovafeed benefited from starting with a smaller production site and scaling up incrementally. This more measured approach allowed them to adapt and refine their business model along the way.
Europe’s Scaling Gap: A Broader Pattern
For Professor Haslam, Ÿnsect exemplifies a larger problem within Europe. He argues that Europe tends to fund ambitious “moonshots” while underfunding the crucial factory-level industrialization needed to bring those innovations to market.
He points to other recent European tech failures as evidence:
* Northvolt: A struggling Swedish battery manufacturer that recently filed for bankruptcy.
* Volocopter: A German air taxi startup that also filed for bankruptcy.
* Lilium: A failed German flying taxi company that ceased operations.
This pattern suggests a systemic issue in how Europe supports and scales deep-tech ventures.
A Call for Industrial Policy
The failure of Ÿnsect has sparked introspection.Antoine Hubert, the company’s co-founder, has as co-founded Start Industrie.
This association advocates for policies that specifically support French industrial startups. Hubert recognizes that Europe needs more than just funding to cultivate the next generation of deep-tech companies. It requires a extensive industrial strategy.
What Does This Mean for You?
If you’re an investor, entrepreneur, or policymaker, Ÿnsect’s story offers valuable lessons. It highlights the importance of:
* Market Validation: Thoroughly validating your business model before significant capital investment.
* Incremental Scaling: Prioritizing a phased approach to scaling, allowing for adaptation and learning.
* industrial Policy: Recognizing the need for policies that support not just innovation,but also industrialization.
