French startup Ensect made headlines when “Iron Man” star Robert Downey Jr. touted its virtues on the “Late Show” during Super Bowl weekend 2021. Now, almost four years later, the insect farming company has been put into judicial liquidation – essentially bankruptcy – for insolvency.
The company’s demise is not a surprise, as Ÿinsect had been in crisis for several months. Still, there’s a lot to explain how a startup could go bankrupt despite raising over $600 million from people including Downey Jr.’s Footprint Coalition, taxpayers, and many others.
Ultimately, Insect failed to fulfill its ambition to “revolutionize the food chain” with insect-based proteins. But don’t be too quick to attribute its failure to the “bad” factor that many Westerners feel about bugs. Human food was never its main focus.
Instead, Ensect focused on producing insect proteins for animal feed and pet food, two markets with very different economics and margins between which the company never chose.
This indecision extended to its M&A strategy. In 2021, Ÿnsect acquired Protifarm, a Dutch company that grows mealworms for human food applications, adding a third market to the mix. Even when the company announced the deal, then-CEO Antoine Hubert acknowledged that it would take a few years for human food to represent only 10% to 15% of Ÿinsect’s revenues.
Hubert announced at the time, “We still see pet food and fish feed as the largest contributors to our revenues in the coming years.” In other words, Ÿinsect was acquiring a company in a market segment that would remain marginal for years – at a time when the startup desperately needed revenue growth.
And there was a revenue problem. According to publicly available data, Ÿnsect’s revenue from its main unit reached €17.8 million (about $21 million) in 2021 – a figure reportedly boosted by internal transfers between subsidiaries. By 2023, the company had suffered a net loss of €79.7 million ($94 million).
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So how did a company with such little revenue raise more than $600 million? The answer wasn’t hype-driven crossover funds paying ambitious multiples during the funding frenzy of 2021. Instead, Ÿinsect attracted impact-focused investors like Estnor Ventures and public investment bank Bpifrance, who bought into a compelling sustainability vision.
Its pitch to them was simple – to provide an alternative to resource-intensive proteins like fish meal and soy. The same thesis also attracted significant capital from competitors like Better Origins and InnovaFeed, and it looked promising.
But this approach collided with market reality. Animal feed is a commodity market driven by price, not sustainability premium. In an ideal world, insect protein would be completely circular, with insects feeding on food waste that would otherwise go to landfill. But in practice, factory-scale insect production typically relies on grain by-products that are already usable as animal feed – meaning insect protein just adds an expensive extra step. For animal feed, the math wasn’t quite working out.
Eventually the insect recognized it. Pet food proved to be a different equation: it is based on a lower price than animal feed and, despite competition from other alternative proteins such as lab-grown meat, there is a far better market for insect proteins. By 2023, the company will refocus its strategy on pet food and other higher-margin areas, with Hubert citing macroeconomic pressures.
“In an environment where there is inflation on energy and raw materials, but also on the cost of capital and credit, we cannot invest loads of resources in the markets that are the least remunerative (animal feed), while you have other markets where there is very high demand, good returns and high margins,” Hubert said at the time.
The 2023 pivot came too late for pet food. By then, Ÿinsect had already committed to a big, capital-intensive bet that would ultimately ruin the company. That bet was Ÿnfarm, a “giga-factory” in northern France that the company called “the world’s most expensive bug farm.” Built to produce insects on a large scale, the facility cost millions of dollars – money spent before Insects had proven its business model or figured out its unit economics.
To oversee the launch of Ÿnfarm, Ÿinsect brought on Shankar Krishnamurthy, a former executive at French energy giant Engie. When that move into pet food failed to save the company, Krishnamurthy replaced Hubert as CEO.
Ensect then closed the manufacturing plant it acquired from ProtiPharm and cut jobs. But closing one facility won’t solve the fundamental problem when operating a giga-factory built for the wrong market.
For Professor Joe Haslam, who teaches courses on scaling up in the MBA program at IE Business School, “Insect conflicts are no secret and are not primarily about insects. They are the result of a mismatch between industrial ambition, capital markets and timing, coupled with some execution and strategy choices.”
The fact that insect farming failed does not mean that the entire insect rearing sector is doomed. Competitor InnovaFeed is reportedly doing better, as it started with a small production site and is slowly expanding.
For Professor Haslam, the pest is an example of a wider European problem. “Ensect is a case study in Europe’s scaling gap. We fund moonshots. We underfund factories. We celebrate pilots. We shun industrialization. See Northvolt [a struggling Swedish battery maker]Volocopter [a German air taxi startup]and lilium [a failed German flying taxi company],” He said.
The failure has prompted some introspection. Hubert himself co-founded Start Industry, an organization advocating for policies that support French industrial startups – a recognition that Europe needs more than just funding to build the next generation of deep tech companies.
