South African insect protein startup Inseco has shut down after nearly seven years in operation, concluding a high-profile push to commercialize black soldier fly products. The Cape Town company confirmed it ceased trading and sold its assets to industry partners, three years after raising a $5.3 million seed round. Founders Simon Hazell and Jack Chennells framed the decision as the culmination of operational shocks, strategic missteps, and a tougher funding climate.
From Promising Cleantech to Wind-Down
Founded in 2018, Inseco converted organic byproducts from food processors into insect protein meal, oil, and fertilizer for aquaculture, pet food, and poultry customers. Early traction brought accolades such as South Africa’s Global Cleantech Innovation Program win in 2019 and attention from institutional investors. The company also positioned itself as a regional leader, citing state-of-the-art processing and the ability to produce defatted insect meal and oil.
Power Cuts That Changed the Trajectory
The most immediate blow, according to Hazell, came from extended electricity outages known locally as loadshedding. Repeated four-hour cuts destabilized colony temperatures, impaired processing lines, and pushed energy costs sharply higher over several months. Backup systems covered ventilation, but power-hungry manufacturing zones remained exposed, triggering supply chain pressure, staff departures, and the loss of hard-won foreign-currency offtake agreements.
Capital Allocation and Timing Mistakes
Inseco had planned to install a large generator but deferred the purchase to preserve seed capital when severe loadshedding seemed unlikely. When the generator finally arrived, outages were soon suspended, limiting the benefit and underscoring how timing can compound operational risk. Hazell acknowledged that these choices, though understandable at the time, proved expensive in hindsight and eroded investor confidence.
Strategy, Hiring, and the Scale Curve
Leadership conceded that internal execution issues amplified external shocks. Hazell said the team made some bad hires, scaled too quickly, and pivoted too slowly toward technologies that could have improved margins on insect biomass. The company modeled a scale and price intersection it believed would convert customers, but the execution risk at that level ultimately outweighed the benefits the plan projected.
Sector Headwinds and Investor Sentiment
Inseco’s difficulties played out against a sector grappling with rising rates and more selective capital. Several insect protein peers faced setbacks, intensifying questions about whether operators can consistently beat entrenched inputs like fishmeal and soy on price at scale. While the underlying biology and circularity appeal are compelling, commercial maturity has been slower and cost curves tougher than many early theses assumed.
A Big Seed Round and a Compelling Thesis
The 2022 seed round, led by Futuregrowth Asset Management with participation from E4E Africa, Oak Drive Ventures, and others, ranked among South Africa’s larger seed financings. Backers highlighted lower environmental impact, reduced waste, minimal greenhouse gas emissions, and limited water use relative to conventional proteins. Proceeds were earmarked for scaling manufacturing in Cape Town and advancing research and development to improve product performance and unit economics.
What Becomes of the Assets and the Vision
Inseco’s equipment and selected intellectual property have been sold to industry partners, with some assets already repurposed within insect production and adjacent fields. Hazell remains convinced the category can thrive if companies unlock better margins and align scale with execution capacity. He framed the ultimate lesson as a blend of timing, resilience, and luck that sits alongside technology in determining outcomes.
Outlook for Insect Protein
Global insect protein volumes remain modest but carry long-term potential tied to feed and pet food demand, provided cost competitiveness improves. Industry growth will depend on standardized frameworks, consumer acceptance where relevant, and robust plants that can ride through infrastructure volatility. For operators, disciplined scaling and margin-accretive technologies may prove decisive in attracting durable capital.
Inseco’s closure marks a sobering moment for an industry built on upcycling waste into high-value protein, yet it does not close the door on the thesis. The company’s journey shows how infrastructure fragility, timing errors, and scaling risk can compound even with strong science and market interest. As assets find new homes, the sector’s next chapter will hinge on tighter execution, smarter capital deployment, and technologies that reliably shift the cost curve.
Source: Launchbaseafrica