French startup Ÿnsect shot into the spotlight when “Iron Man” star Robert Downey Jr. touted its merits on the Late Show during Super Bowl weekend 2021. Now, nearly four years later, the insect farming company has been placed into judicial liquidation — essentially bankruptcy — for insolvency.
The company’s demise is hardly a surprise, as Ÿnsect had been embattled for months. Still, there is plenty to unpack about how a startup can go bankrupt despite raising over $600 million, including from Downey Jr’s FootPrint Coalition, taxpayers, and many others.
Ultimately, Ÿnsect failed to fulfill its ambition to “revolutionize the food chain” with insect-based protein. But don’t be too quick to attribute its failure to the ‘ick’ factor that many Westerners feel about bugs. Human food was never its core focus.
Instead, Ÿnsect focused on producing insect protein for animal feed and pet food, two markets with very different economics and margins that the company never quite chose between.
That indecision extended to its M&A strategy. In 2021, Ÿnsect acquired Protifarm, a Dutch company raising mealworms for human food applications, adding a third market to the mix. Even as the company announced the deal, then-CEO Antoine Hubert admitted it would take a couple of years for human food to represent just 10% to 15% of Ÿnsect’s revenue.
“We still see pet food and fish feed being the largest contributor to our revenues in the coming years,” Hubert declared at the time. In other words, Ÿnsect 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 revenue was the problem. According to publicly available data, Ÿnsect’s revenue from its main entity peaked at €17.8 million in 2021 (approximately $21 million) — a figure reportedly inflated by inflated by internal transfers between subsidiaries. By 2023, the company had racked up a net loss of €79.7 million ($94 million).
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So how did a company with such meager revenue raise over $600 million? The answer wasn’t hype-driven crossover funds paying inflated multiples during the 2021 funding frenzy. Instead, Ÿnsect attracted impact-focused investors like Astanor Ventures and public investment bank Bpifrance that bought into a compelling sustainability vision.
Its pitch to them was simple — offering an alternative to resource-intensive …