Inseact founders see promise for insect-based feed in vast Asian market
In late August, Singapore-based Inseact raised USD 1.3 million (EUR 1.1 million) in an oversubscribed seed funding round that will help it advanced plans to become a producer of insect-based aquaculture feed. In an interview with SeafoodSource, Inseact CEO Tim Van Vliet and COO Michael Badeski explained how the black soldier flies they are producing for aquaculture feed using waste streams from palm oil processing fill a demand for alternative proteins in Asia, where the bulk of global aquaculture is centered.
SeafoodSource: How did you get into the business of producing insects for aquaculture feed?
Van Vliet: I don’t have a long background in insect protein. I am Dutch but I am also Samoan. I used to go there [Samoa] a lot and over the years saw the effects of overfishing, I saw my family there and that they could no longer sustain a living from catching fish. I got to go through why it was the case. One of the main reasons is overfishing. It takes a lot of wild fish to grow farmed fish. I have a background in nutrition and protein. I thought, why can’t I do something around this idea? Then I realized some other companies were doing this. Then, after [obtaining] an MBA [at] INSEAD, I joined InnovaFeed, a French insect protein company. Then I decided, “I think we can do this better.” So we set up the business in Singapore.
SeafoodSource: What part of the palm oil waste stream are you using as a feedstock?
Van Vliet: The waste is not from the plantations themselves. Rather, it’s from the mills and the downstream processing side. One of the main waste streams is from palm oil wastewater, a mud-like substance emits a lot of methane that is a core ingredient we use to feed the insects.
SeafoodSource: Who do you see as your major competitors, and what sets you apart from them?
Van Vliet: The big players are in Europe. In Asia it’s a very nascent industry. Two or three companies are at it for a number of years. They are not at scale yet and that is something we think we will bring. We come at it from a business background. We think we need solid business fundamentals. We are also coming at it from engineering and scaling up backgrounds. That’s Michael’s background. We know this thing only succeeds if you become big to supply quantities that aquaculture needs. That is our mission – not to be small but to be a big player with volume and scale.
I worked for one of our competitors, the European one. Feedstocks are an important element. Using a product that is free rather than paying for it is logical. Using a waste product is also better from an environmental perspective and that is what we are really about. Our competitors are using waste, but mainly kitchen and urban waste. We think that is strategically a mistake because it’s not possible to scale up and the quality is inconsistent, meaning inconsistent output. That is one thing we believe we are doing much better.
SeafoodSource: What stage are you at with customers? One of your investors is a major shrimp company. Are you talking just to that investor?
Van Vliet: The reason we haven’t disclosed the name of the shrimp company investor is because we don’t want to limit ourselves to that one company. Because others may think, “They are working with this player and I don’t want to work with them.” We want to include other customers as well. We want to have a variety of customers and in different countries. Having said that, we could focus on that one customer. Their volumes are so big that they have many years of volume [requirements], but for strategic reasons we don’t want to do that.
SeafoodSource: What draws potential customers to you?
Van Vliet: When I was working in Europe, most of the interest was in sustainability, [and] that also is a personal interest. But we have run trials for producers showing how much better the results [from our feed] are compared to using fishmeal they are using now. And the real driver of everything in Southeast Asia is margins and money. And that is our proposition to them. We are proposing a product that makes them more money. Therefore, they are very excited about the value proposition we offer. The only way to make it work is if the shrimp farmers and mill can make more money using our product.
SeafoodSource: What kind of margins are you looking at, given your main input is free?
Van Vliet: We have ideas about this but we can’t share them. I can say that the margins we are looking at are more healthy than those of European competitors. Feed stock is fundamental to costs. But we still need to run our supply chain and we have some other ingredients that come from other processes. Also we pay for labor, utilities, and machinery.
SeafoodSource: You have quite a long list of investors. Were you an easy sell for the investment community?
Van Vliet: Initially, we were planning on raising funds a little bit before the actual date but due to COVID, we waited. The moment we put out word, things went quite fast, especially when we had the [Asian Development Bank] aboard. when you have one investor on board, Others follow. They are tough to get on board and they do a lot of due diligence. But other investors then want to be on board. They say, “we know these guys and they have their teams out on the ground checking things.”
SeafoodSource: Are you worried a big Chinese player will come along and copy you?
Van Vliet: There is competition from China. I lived in Beijing for many years and I know the China market really well. You always look at what China is going to do. They like a lot of innovation [and] there is a strong need for feed and ingredients. Regulatory-wise, there are still hurdles [to insect-based feeds], there but this could also be an opportunity. One of the companies we are in talks with is a very big Chinese conglomerate, one of the biggest animal feed companies in the world. China is the biggest aquaculture market, but [we] also know it’s hard to capture value out of it. To do it, we will stay in Southeast Asia.
SeafoodSource: Your company and several others producing feed from insects are based in the Netherlands. Is there a particular Dutch expertise in this industry?
Van Vliet: We are very strong in food production and in genetics. I come from a dairy background. Holland also has world-class universities like Wageningen [University], which has a very strong entomology department. A lot of the work on the black soldier fly happened in this university when the Protix guys went there to see if this could be scaled up.
SeafoodSource: Why is the black solider fly so suitable for feed production?
Badeski: It’s an amazing insect for a few standout reasons. It has a ravenous appetite and hunger for a wide variety of materials. Therefore, it eats and grows very quickly. Also, its nutrition breaks down with lots of proteins and fats in it. There are a few other insects being cultivated, like crickets and mealworms. But they do not grow as fast. Also, [the black solder fly] is not a disease vector and it’s endemic to Southeast Asia – the climate here is perfect for it.
Photo courtesy of Inseact