French startup Ÿnsect caught the public’s attention when Robert Downey Jr., famous for his role as “Iron Man,” praised it on the “Late Show” during the Super Bowl weekend in 2021. Fast forward nearly four years, and the insect farming company has entered judicial liquidation—essentially declaring bankruptcy—due to insolvency.
Ÿnsect’s downfall isn’t surprising; the company faced challenges for months. It raises questions about how a startup can fail despite securing over $600 million in funding, including investments from Downey Jr.’s FootPrint Coalition and taxpayer contributions.
The company ultimately couldn’t live up to its goal of “revolutionizing the food chain” with insect-based protein. But it’s essential to note that the “ick” factor regarding bugs isn’t the sole reason for its failure. Human food was never its primary focus.
Instead, Ÿnsect aimed to produce insect protein for animal feed and pet food. These two markets operate under different economic conditions and profit margins, and Ÿnsect struggled to commit to one over the other.
In 2021, Ÿnsect expanded its reach by acquiring Protifarm, a Dutch company specializing in mealworms for human food. This acquisition added complexity to its business model. At the time, then-CEO Antoine Hubert acknowledged it would take several years for human food to contribute only 10% to 15% of Ÿnsect’s revenue. He indicated that pet food and fish feed would continue to be the company’s primary revenue streams.
Despite this, Ÿnsect’s revenue remained an issue. Public data show that its revenue from its main operations peaked at €17.8 million in 2021 (around $21 million), but this number was reportedly inflated due to internal transactions. By 2023, Ÿnsect recorded a net loss of €79.7 million ($94 million).
So how did a company with such little revenue pull in over $600 million? It wasn’t just hype from crossover funds during the 2021 funding boom. Ÿnsect attracted impact-focused investors like Astanor Ventures and Bpifrance by presenting a convincing sustainability narrative. The pitch centered on providing an alternative to resource-heavy proteins like fishmeal and soy, a concept that also drew significant investment to competitors like Better Origin and Innovafeed.
However, the vision didn’t align with market realities. The animal feed market is primarily driven by price rather than sustainability. In an ideal scenario, insect protein would be circular, using food waste that would otherwise end up in landfills. In reality, factory-scale insect production often relies on cereal by-products that are already fit for animal feed, making insect protein an additional cost rather than a straightforward solution. The economics just didn’t add up.
Ÿnsect eventually recognized this misalignment. They found that pet food presented a better opportunity. Compared to animal feed, the pet food market is less price-sensitive and more suitable for insect protein, despite competition from other alternative protein sources like lab-grown meat. By 2023, the company decided to refocus on pet food and other higher-margin sectors, as Hubert highlighted the economic pressures they faced.
“In an environment where energy and raw material costs are escalating, along with capital expenses, we cannot afford to sink resources into the least profitable markets (like animal feed) when demand and better profit margins exist elsewhere,” he remarked.
Unfortunately, this strategic pivot came too late. Ÿnsect had already committed to a large, costly venture—the Ÿnfarm, touted as “the world’s most expensive bug farm.” This facility was designed for large-scale insect production and consumed hundreds of millions in funding before Ÿnsect solidified its business model or figured out its unit economics.
To lead the launch of Ÿnfarm, Ÿnsect brought in Shankar Krishnamoorthy, a former executive at French energy firm Engie. When the shift to pet food didn’t rescue the company, Krishnamoorthy took over as CEO after Hubert.
Ÿnsect went on to close the production facility it acquired from Protifarm and make job cuts. However, terminating one site while continuing operations at a massive facility tailored for the wrong market couldn’t address the underlying issues.
Joe Haslam, a professor at IE Business School, explains that Ÿnsect’s challenges aren’t a mystery and aren’t solely tied to the use of insects. “They stem from a disconnect between ambitious industrial goals, capital markets, and timing, exacerbated by execution and strategy missteps.”
Despite Ÿnsect’s failure, the insect farming sector isn’t necessarily doomed. Competitor Innovafeed reportedly remains more stable, partly due to its smaller production site and gradual scaling.
For Professor Haslam, Ÿnsect illustrates a broader problem in Europe. “It’s a case study in the continent’s scaling gap. We support big ideas but underfund production facilities. We celebrate pilot programs but neglect industrialization. Look at Northvolt, Volocopter, and Lilium,” he said.
The setback has led to some reflection within the industry. Hubert co-founded Start Industrie, an organization advocating for policies that support French industrial startups, acknowledging the need for more than just funding to foster the next wave of deep tech companies.
