Insect Farming Startups Struggle as Industry Collapses

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The insect farming industry, once touted as a sustainable solution to feed a growing population, is now facing a major collapse. Over the past decade, venture capital firms and governments invested around $2 billion into insect farming startups across Europe, the US, and Canada. However, nearly a quarter of the 20 largest insect farming companies have gone out of business in recent years, including the industry's largest player, Ÿnsect. The high costs of insect farming, competition for feed ingredients, and lack of consumer demand for bug-based foods have all contributed to the industry's struggles. Even major players like Tyson Foods and Innovafeed have had to put plans for large-scale insect farms on hold.

Why it matters

The insect farming industry was seen as a way to provide a more eco-friendly alternative to traditional meat production. However, the industry's collapse raises questions about whether insects can truly displace conventional livestock as a food source. It also highlights the challenges of scaling up novel agricultural technologies, even with significant investment. The ethical concerns around potentially farming trillions of insects for food add another layer of complexity to the industry's future.

The details

Insect farming is similar to other types of animal farming, with insects being raised in large numbers in factory-style buildings. Many of the same welfare concerns for farmed chickens and pigs, like disease, cannibalism, and painful slaughter, are present on insect farms. Insects are killed through various means, including freezing, baking, roasting, and suffocation. While some people may be open to adding bugs to their diet, insects remain a novelty food in the US and Europe, rather than a commodity capable of displacing meat. Insect farming startups have also struggled to make insect meal a viable replacement for soy or fishmeal in livestock feed, as the cost of insect meal is significantly higher.

• In 2020, insect companies farmed an estimated 1 trillion bugs.
• In late 2023, Tyson Foods announced it had invested in the Dutch insect farming startup Protix to build a large insect farm in Nebraska.
• In early 2024, Innovafeed opened a pilot insect farming plant in Decatur, Illinois, in partnership with ADM, but suspended operations a year and a half later due to funding challenges.
• In late 2023, the largest insect farming startup, Ÿnsect, ran out of money after raising over $600 million in funding.

What they’re saying

What’s next

More insect farming startups are likely to go out of business in the years ahead, and the survivors may need to move to warmer climates and lower operating costs to continue on.