After almost seven years, Inseco’s journey has come to an end. The Cape Town-based insect protein startup has ceased operations and sold its assets to industry partners, marking another setback for the emerging insect agriculture sector. The closure comes just three years after the company raised one of South Africa’s largest seed rounds — a $5.3m injection that was meant to propel it to commercial scale.

Founded in 2018 by Jack Chennells and Simon Hazell, Inseco bred black soldier fly larvae on organic waste from food processors, converting what would otherwise end up in landfills into protein meal, oil and fertilizer for the aquaculture, pet food and poultry markets.

The company was once considered a market leader in the Southern Hemisphere, winning South Africa’s Global Cleantech Innovation Program in 2019 and attracting significant investor interest. But a combination of operational challenges, infrastructure failures and strategic missteps ultimately proved fatal.

When the lights went out

The most damaging blow came from an unexpected source: South Africa’s chronic electricity crisis. Recurring four-hour power outages, known locally as “loadshedding,” devastated operations over several months and became a turning point for the business.

“The unexpected and sudden onset of late-stage loadshedding had a profoundly negative impact on our business,” Hazell wrote in a farewell message to stakeholders, seen by Launch Base Africa. “The recurring four-hour power outages that went on for several months devastated operations, increased our energy costs fourfold and placed enormous pressure on our supply chain.”

Manufacturing biological products at scale requires stable conditions. Temperature fluctuations in the insect colonies caused by power cuts created cascading problems across the facility. While Inseco had backup power for essential equipment like colony ventilation, it couldn’t run energy-intensive processing areas during outages.

The company had planned to install a large generator system but deferred the purchase to manage capital allocation from its seed round. “At the time, the risk of severe loadshedding seemed low, so we deferred this investment,” Hazell explained. “In hindsight, this was an expensive mistake.”

When Inseco eventually secured a large generator, loadshedding was suspended shortly after. “It was useful for a few months, and then loadshedding was suspended and has not come back since,” Hazell noted.

The production disruptions had wider consequences. The company lost valuable dollar and euro-denominated offtake agreements it had worked hard to secure. Key staff departed. Investor confidence eroded.

‘We made some bad hires’

Power outages weren’t the only problem. In his post-mortem analysis, Hazell acknowledged significant 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 had been developing technology to generate better margins from insect biomass but didn’t prioritize it quickly enough. 

Inseco’s original thesis was straightforward: transform low-value organic byproducts into abundant, affordable protein. Early research suggested insects had structural advantages over conventional options like fishmeal and could gain market acceptance once supply became available.

But execution proved more difficult than anticipated. “The success of our technology relied on the assumption that with sufficient scale, we could drive down prices and deliver a meaningful benefit to customers,” Hazell explained. “We modeled various scenarios and selected a level of output that corresponded to a price we forecasted would convert customers. However, on the opposite axis of scale lies execution risk, and we ultimately chose an intersection that proved too aggressive.”

Sector headwinds

The broader market environment didn’t help. After years of easy money during the zero interest rate policy era, fundraising became significantly harder. Several high-profile insect protein companies struggled or collapsed, dampening investor enthusiasm across the sector.

French insect agriculture pioneer Ÿnsect recently secured more time under court supervision to restructure operations. Fellow French company Innovafeed paused operations at a pilot plant in Illinois, though it maintains plans to build a commercial-scale facility remain active.

The challenges reflect broader questions about the commercial viability of insect protein at scale. While the technology works, achieving competitive pricing against established alternatives like fishmeal and soy has proven difficult for many operators.

The $5.3m round

Inseco’s 2022 seed round was led by Futuregrowth Asset Management through its Development Equity Fund, with participation from E4E Africa, Oak Drive Ventures and other investors. At the time, it represented one of the largest seed rounds in South African startup history.

The investment thesis was compelling. Compared to traditional protein sources, insect production has lower environmental impact, reduces food waste, involves minimal greenhouse gas emissions, uses limited water and requires no arable land.

“The investment into Inseco fits well within our responsible investment philosophy,” said Amrish Narrandes, head of unlisted equity at Futuregrowth at the time. “In comparison to traditional protein sources, insect protein has an inherently lower environmental impact.”

Inseco intended to use the capital to increase manufacturing capacity at its Cape Town facility and fund ongoing research and development.

Investment analyst Ayanda Bolani described Inseco as “a market leader in this space” with “advanced, state-of-the-art processing capabilities, placing it well ahead of its competitors.” The company was the largest insect protein producer in the Southern Hemisphere and the only South African company that could produce defatted insect meal and oil.

What’s next for insect protein?

Despite his company’s failure, Hazell remains optimistic about the sector’s potential.

“I still believe the insect protein industry can thrive,” he said. “Unlocking better margins is, in my opinion, the best way to improve chances of success. We got close but ultimately ran out of time.”

The global market for insect protein currently stands at approximately 10,000 metric tons annually. Industry analysts have projected it could reach 500,000 metric tons by 2030, driven primarily by demand from the feed and pet food sectors. The total edible insect market across all product forms and applications is expected to reach $4.63bn by 2027.

But reaching that potential will require companies to overcome significant obstacles: establishing standardized industry frameworks, addressing psychological barriers to insect-based foods in some markets, building sufficient production capacity and achieving cost competitiveness.

Inseco’s assets, including equipment and some intellectual property, have been sold to industry partners. Some are being used in insect production; others have found applications in adjacent industries.

In reflecting on the experience, Hazell offered a measured conclusion: “The most important lesson I’ve learned is that success isn’t just about technology. It’s about timing, resilience and a healthy dose of luck.”