When a startup fails, the post-mortem often points to market, timing, or technical hurdles. For Simon Hazell, co-founder of the collapsed South African insect protein startup Inseco, one of the sharpest lessons is simpler: choose your investors and board members wisely.
“If your startup needs outside capital, it’s best to raise it from people who understand early-stage investing,” Hazell reflected in a personal analysis following his company’s closure. “A massive bonus if they understand your industry.”
Hazell’s reflections come just weeks after Inseco, founded in 2018, ceased operations and sold its assets. The closure was a significant blow to the emerging insect agriculture sector, especially as it followed one of South Africa’s largest-ever seed rounds — a $5.3m injection in 2022 meant to propel the company to commercial scale.
Inseco bred black soldier fly larvae on organic waste, converting it into high-value protein meal, oil, and fertiliser for the aquaculture and pet food markets. But despite its promising technology and backing from investors like Futuregrowth Asset Management, the company succumbed to a mix of external shocks and internal missteps.
The Loadshedding Catalyst
The most severe external blow came from South Africa’s chronic electricity crisis, known as “loadshedding.”
“The unexpected and sudden onset of late-stage loadshedding had a profoundly negative impact on our business,” Hazell explained.
Manufacturing a biological product at scale requires stable conditions. The recurring four-hour power outages devastated operations, causing temperature fluctuations in the insect colonies that created cascading production failures. According to Hazell, the crisis increased the company’s energy costs fourfold and “placed enormous pressure on our supply chain.”
In a critical error, the company had deferred purchasing a large generator system to manage its capital. “At the time, the risk of severe loadshedding seemed low,” Hazell noted. “In hindsight, this was an expensive mistake.”
The production disruptions led to the loss of valuable dollar and euro-denominated offtake agreements, accelerated staff departures, and eroded investor confidence.
‘We Scaled Too Quickly’
While the power crisis was a catalyst, Hazell was candid about the company’s internal failures.
“Loadshedding is not the only reason we failed,” he wrote. “We made some bad hires. We scaled too quickly and pivoted too slowly.”
The company’s core strategy relied on achieving massive scale to drive down prices and compete with traditional proteins like fishmeal. “We modeled various scenarios and selected a level of output… however, on the opposite axis of scale lies execution risk, and we ultimately chose an intersection that proved too aggressive.”
Hazell also admitted to strategic inflexibility, noting they “stuck with the wrong strategy for too long… I think the most important one is that I was afraid to admit that the original idea was not as good as I thought.”
Boardroom Brakes and Legal Knots
This internal strategic challenge was compounded by governance issues — lessons Hazell now shares publicly.
His primary warning centres on investor alignment. The chaotic, fast-paced nature of an early-stage venture requires investors who understand the journey.
Beyond the investors themselves, Hazell cautioned founders about board composition. “Early-stage businesses are chaotic and often require fast decision-making,” he said. He advised founders to ensure that when putting a board together, “decision making is not hamstrung by busy schedules.”
He extended this advice to legal structures, which can create similar bottlenecks. “At the outset, try to keep your legal structures simple,” he urged. “I know many founders (including myself) who have been caught up in complex situations… it can cost you down the line.”
From ‘Moonshots’ to Management
Hazell’s reflections offer a candid look at the founder’s journey, from ideation to leadership.
- Avoid the ‘Moonshot’: “We had very limited resources when we started out. Virtually zero,” Hazell recalled. “In hindsight, the decision to go after a moonshot idea (like Inseco) was dubious.” He now advises founders to “work on something simpler, in a competitive niche, that can start small and grow.”
- Awards vs. Customers: Inseco won numerous awards, including South Africa’s Global Cleantech Innovation Program. Hazell now sees them as a distraction. “They are a means to an end. When starting out, making something that customers want is the only metric that counts.”
- Leadership and Humility: Hazell, 28 at the time, found himself managing an executive team of 40-something-year-old chartered accountants, engineers, and MBAs. “I, on the other hand, only had ‘raw horsepower’ to offer,” he said. “Leading and managing in this environment is daunting and requires a delicate balance of humility and confidence.”
- Communication is Key: One of his biggest regrets was not being more transparent as challenges mounted. “When times are tough, over communicate. This applies to your team, suppliers, investors, etc… I regret not doing better here.”
Headwinds for Insect Protein
Inseco’s failure is not an isolated incident. The broader insect protein sector has faced significant headwinds as the era of zero-interest-rate policy has ended, making funding for capital-intensive hardware startups scarce.
French giant Ÿnsect recently secured court supervision to restructure, while competitor Innovafeed paused operations at a US pilot plant. The core challenge for the industry remains proving commercial viability and achieving cost competitiveness against established feed sources like soy and fishmeal.
Despite his company’s fate, Hazell remains optimistic. “I still believe the insect protein industry can thrive,” he concluded. “Unlocking better margins is, in my opinion, the best way to improve chances of success. We got close but ultimately ran out of time.”