News Article

A Seattle Startup, Beta Hatch, Thinks Growing Bugs for Animal Feed Is a Billion-Dollar Opportunity

Inknowvation Site Notes

A brand new entry in to the SBIR space with an NSF Phase I Award is 2016, clearly Virginia Emery has her sights set on changing the world, millions of bugs at a time!!
As an avid gardner myself - thou art English, thou wilt garden - with what I thought was a heavy-duty worm farming operation at the core of what I do, I feel quite intimidated.
Date: Jul 06, 2017
Author: Susan Adams
Source: Forbes ( click here to go to the source)

Featured firm in this article: Beta Hatch Inc of Cashmere, WA



Virginia Emery is building a business on bugs. After earning a Ph.D. in entomology from U.C. Berkeley, she spent a year as a research scientist at a pest control company, trying to curb the Dengue mosquito, before founding Seattle-based Beta Hatch in 2015. The startup farms meal worms, which grow into beetles within 90 days. The bugs eat waste products like canola meal cast off by food producers, and they can survive without light. Emery, 30, and her team of five employees, freeze-dry the grown beetles and package them as organic feed for fish and chickens. They also collect the creatures' waste and sell it as fertilizer. In this interview, which has been edited and condensed, she explains why she thinks bug farming can be huge.

Susan Adams: Where did you get the idea for Beta Hatch?

Virginia Emery: After several years working on pest control, trying to kill bugs, I realized the incredible potential to develop insects as a resource, to fill the need to produce protein.

Adams: Aren't most people repulsed by the idea of eating bugs?

Emery: Yes, but chicken and fish love insects and it's a natural part of their diet. In aquaculture, there's a huge need for fish meal, which is unsustainable.

Adams: Why is fish meal unsustainable?

Emery: It's made out of little fish. The supply is strained and unpredictable. Insects can be produced indoors, year-round, and they can be grown from organic byproducts.

Adams: What made you think that farming insects could be profitable?

Emery: With most farming, the big costs are feed. Our feed is free. In Seattle, we get spent grain from brewers, who pay us to take it away. For the protein feed we produce, we can get $6 a pound. wholesale and $15 a pound retail. Our fertilizer sells for $5 a pound.

Adams: What about your other costs, like real estate?

Emery: We're in a 7,000-square-foot converted office space where we pay 50 cents a square foot. Right now, we're producing a couple hundred pounds of fertilizer and feed a month, but we're far below capacity. Next year we'll produce between 6 and 15 tons of protein a month from a small footprint and we can do it continuously. That's a huge improvement over fish meal.

Adams: How much feed and fertilizer do you need to sell to be profitable?

Emery: We're building a 25,000-square-foot facility and we think we'll break even in two years.

Adams: What were your startup costs and how did you raise the money?

Emery: I bootstrapped the business for the first year and we got a $47,000 zero percent loan through friends, family and a non-profit community lender called Craft3. We also raised $670,000 in a pre-seed round from angel investors.

Adams: How much do you need to raise for the new facility?

Emery: It will cost between $2 million and $3 million and we'll need that much in working capital.

Adams: Do you have any other revenue sources?

Emery: We have more than $500,000 in R&D contracts from government sources. The only known way to biodegrade the plastic in Styrofoam is in the gut of a meal worm. That discovery was made at Stanford and we're collaborating with researchers there. We've got a grant for that from the National Science Foundation.
Waste solution: Meal worms eating Styrofoam.
Beta Hatch

Waste solution: Meal worms eating Styrofoam.

Adams: How receptive are funders to your pitch?

Emery: There's a misconception on Wall Street and in Silicon Valley that farming is easy and not technology-driven. We're pursuing patents on several pieces of equipment specific to producing insects. We're also producing tangible value. We're starting to see investors recognize that.

Adams: How do you market your feed and fertilizer?

Emery: Right now, we have a B-to-B business model. The best marketing you can do in agriculture is showing that your product works. We're doing feed trials in fish and poultry and field trials with fertilizer on fruits, herbs and vegetables.

Adams: How many customers do you have?

Emery: We have several letters of intent but we can't deliver the volume our customers are looking for. We're selling to the organic niche first. But if we can show that we're bringing real value to all farmers, they'll buy our product. At scale, we can deliver at the same price as fish and other feed. I think we'll be priced competitively with soy, which is a seasonal crop. We're year round.

Adams: What about the fertilizer side of your business?

Emery: It's a bonus. We have zero waste and that's part of the beauty of producing these animals.

Adams: Are you selling fertilizer to home farmers?

Emery: Our certified organic fertilizer is in 11 stores in the Seattle area. It's $11 for a 20-ounce bag.

Adams: Is it a distraction to sell a consumer product?

Emery: Right now, we're constrained by volume, we have to go where there's revenue and we're getting it from higher-margin business. A farmer can't afford our product yet.

Adams: Are any other companies doing what you're doing in the U.S.?

Emery: The big news a few weeks ago was that [biotech developer] Intrexon is in a joint venture with [sustainable natural ingredient producer] Darling Ingredients to make feed from black soldier flies.

Adams: What's been your biggest challenge so far?

Emery: We missed some moth eggs in our feed stock and suddenly we became a moth farm and not a meal worm farm. We lost a lot of meal worms but we learned a lot and we were glad we hadn't scaled too quickly.

Adams: How big do you think Beta Hatch can be?

Emery: I think we have a billion-dollar opportunity. Most people don't think about what the fish or chicken they're eating is eating. Animal feed is a $400 billion global industry. We're focused on replacing fish meal. That's a $17 billion market.

For more on indoor agriculture: Read about Bowery Farming and its $20 million funding round