Mealworm ingredient producer Beta Hatch closes $10m growth funding round

By Jane Byrne contact

- Last updated on GMT

© GettyImages/arthon meekodong
© GettyImages/arthon meekodong

Related tags: mealworm, defatted protein meal, Insect, North america

The round was led by Lewis & Clark AgriFood, with strong support from existing investors, Cavallo Ventures and Innova Memphis.

This funds will be used to finalize and expand Beta Hatch’s flagship facility in Cashmere, Washington, to be able to support rapid expansion of capacity from this flagship location.

Once completed, that site will be the largest mealworm producing facility in North America. It will house the full production process for growing and distributing mealworms.

“We have actually been operating at Cashmore since last November, so it is coming up on close to a year of operations, but not a full-scale; it will be at full capacity either by the end of this year or early next year,”​ said Virginia Emery, founder and CEO, Beta Hatch.

In terms of Cavallo Ventures support, the CEO commented: “It has been a very good relationship, both from a feedback and customer basis. And we are very excited by the investment by Lewis & Clark, and to have access to a whole new portfolio of their customers as well.”

Beta Hatch is talking to a lot of other large players in the industry too, ensuring its value proposition is aligned to their needs, she said.

The Seattle, Washington based-insect producer has raised around US$30m to date, when grants and other funding is taken into account, reported Emery.

“Certainly that is a smaller dollar amount that some of the other companies in our sector. But it is a little bit by design. Our whole thesis is really around a capital efficient approach, smaller scale operations that allow a lot more flexibility with how we deploy that capital and, ultimately, securing a better ROI for investors,” ​she told FeedNavigator.

Sustainable operations

Instead of building something brand new, from the ground up, Beta Hatch takes a brownfield approach, looking to use existing infrastructure and revitalize it. The Cashmere facility is an old juice factory that was sitting idle and empty for near on a decade. “That approach, in itself, makes what we do sustainable.”

Beta Hatch has also prioritized sustainable energy and zero-waste practices at its facilities

“We have developed a waste heat approach for how we source warm air, as the flagship site is co-located with a data center to be able to capture that waste heat and really drive down those electrical needs for the operation,”​ explained Emery.

Its vertical farming system is a high density operation: “You end up with quite a lot of biomass in a very small amount of space which is, ultimately, a much more efficient approach. There is a lot technology involved in making sure, across that three dimensional space, you have optimal growing conditions. We spend a lot of time developing air handling systems that are as efficient as well.”

Beta Hatch also aims to shorten supply chains. The company’s location, close to a large volume of apple processing, means it can use byproducts from that sector such as cores as one of its rearing substrates. Those by-products would go to landfill otherwise, said Emery.

It has also been exploring opportunities to use brewer's spent grain (BSG) as a feedstock. “We spoke to a group of distillers a few months back who have similar challenges to apple processors, a lot of by-product with limited places to put it. By building insect facilities close to such sources of feedstock, we can basically rescue those calories from being waste and that is one of the promises of insect production, globally.”

Hub and spoke model

The company has plans to more than 10x its production within the next year. It has secured product interest far exceeding existing capacity: currently, all available mealworm production is under contract for the near future and discussions are underway with several enterprise customers to partner in the construction of new facilities.

It is scaling up operations by using a hub and spoke model. The Cashmere facility will serve as the hub, producing eggs, while growing sites will be located in close proximity to sources of feedstock and other key points in the supply chain.

This approach means a smaller GHG footprint, and allows new capital investments in rural communities, said the CEO.

“One of the reasons Lewis & Clark invested in Beta Hatch, using its rural investment fund, is because growing sites don’t have to located in a metropolitan area. We can have a dozen or so operators working in a facility and they can be located in a small town or in a rural area.

“Growing sites can be located anywhere in North America and we can get eggs air freight around the country,”​ said Emery.

Ingredient range

The company positions itself as a mealworm ingredients producer, supplying whole dried mealworm, defatted protein meal, oil products and frass.

“When you think what these products are, it is nutrients, both for animals and for soils,”​ said Emery.

The company is working with the wider industry to have frass approved for use in feed application​ as well, she said.

The CEO said mealworm derived defatted protein meal has a good nutritional profile, and it typically has a higher protein content that Black Soldier Fly (BSF) meal.

“The process and genetics can impact the amino acid profile of insect meal. We have been working on ways to increase the relative proportion of methionine and cysteine, and some of the other key amino acids, we are looking to get the best performance out of the products,” said​ Emery.

Beta Hatch is collaborating with other industry players, on the regulatory front, pushing to open additional markets for the sector:  “We speak regularly with other producers, here in North America, and to companies based abroad as well.”

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