What “bugs” food VCs about insect startups?

What “bugs” food VCs about insect startups?

If you’re an insect-based food startup (or a food startup in general) and looking to attract venture capitalists’ funding, you’ll need to have a strong business model. But, beyond strong businesses and unique products, VCs are looking for something else: they’re looking to invest in startups that have secured their intellectual property assets. In this article, we’ll outline the different ways that small food startups can make a big global impact, and show you how you can protect your startup’s assets.  

The world’s population is expected to reach a whopping 8.5 billion people by 2023. And more people means more mouths for countries, families, and farmers to feed. As more people continue to strain food resources, governments and food companies are rushing to find alternative ways to feed hungry mouths. Whether it’s lab-grown meat or alternative proteins, the world is starting to think differently about food.

Alternative proteins are defined as novel proteins—ones that aren’t as common as the well-known proteins, such as chicken or fish. Of course, it’s important to point out that the definition of “novel” depends on who you ask—if you were to ask someone from South Asia, insects are simply another type of food choice on the daily menu. However, North America and Europe are just now discovering that their protein choices are far more expansive than they previously thought—and as a result, we’ve seen a correlated boom in insect-based food startups over the past few years.

If you’re considering diversifying your already-existing food startup, or venturing into the world of food startups, alternative proteins are a rapidly growing space. In fact, venture capital funds invested $7.2 million dollars in the top 7 insect startups as of the third quarter of 2017. That’s a significant sum of money—and there’s still space for your startup to find its stride in a still-evolving space.

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However, there are still a few areas that “bug” VCs who are looking to invest in insect startups.

Unique Value Propositions from Brands

As is common in new and emerging industries, once a trend takes off, companies rush to market to try to gain first-mover advantage and secure market share. In their rush to market, many companies forget to reflect on what their unique value proposition is—you know, the one that makes consumers feel a connection to your product and brand. This is arguably a huge miss on the part of these startups that fail to reflect on their brand values.

In new markets, it’s also important to take a step back and reflect on your brand assets—and what aspects can be protected by a copyright or trademark (if you need any help, feel free to drop us an email and we’ll gladly guide you along the way).  

The “Ick” Factor

Let’s be honest—if you’re a packaged goods company, you need to be able to convince consumers to buy your product in stores or online. And the word “insect” is associated with creepy, crawly creatures in Western culture, not a healthy and sustainable source of protein. Insect startups need to solve how to introduce potential consumers to insect-based foods (whether they’re protein bars or a snack).

And it’s easier said than done. Not everyone agrees that the problem with insect-based foods is the “ick” factor. Some researchers argue that consumers want a better flavor profile—one that creates a rich culinary experience. After all, plenty of “foreign” foods have been accepted into North American/European cuisine—but those foods arguably provide a diverse flavor profile. There’s still plenty of space for startups to bring new ideas to the culinary side of insects—and we think that’s great news!

If you are bringing a new way of preparing insects to the food startup world, we strongly suggest you consider intellectual property protection. In a competitive space, VCs want to invest in startups that are serious about protecting their assets—and not just because they want to make sure your idea is safe. VCs give higher valuations to startups with intellectual property protections in place, leading to more funding for you.

The Journey From Farm to Plate

Another concern that investors may have for insect-based startups is whether your startup is able to consistently source insects that meet food safety standards, particularly in the EU. Some possible solutions to inconsistent and opaque insect farming could be developed using blockchain to verify each step of the supply chain.

In addition to food supply chain concerns, many startups are integrating insects into meat substitutes or high-end cookies/protein bars. However, these food substitutes are priced higher than the non-insect alternatives (and taste the same)—so, what’s the added value for the consumer? We’d argue that’s for insect-based startups to decide—but startups need to decide quickly before consumers outright reject these brands. 

When will we see insect snacks on consumers’ grocery lists?

While it may take a few years before consumers see insect protein in local grocery stores, the addressable market size for edible insects keeps on growing. According to Bloomberg, the market size for edible insects is forecast to grow to over 415 million people in North America and Europe by 2023.

With a massive potential market size, we expect to see even more insect startups bringing their products to market in the next 5 years in the areas of tech and consumer packaged goods. The race for market share has just begun—but we have a question for you:
Will your startup be ready to withstand the fierce competition brewing among insect startups?

When VCs look to invest in food startups, they expect a baseline level of product development and business strategy. However, as competition between food startups increases, VCs are also looking for another component when investing: intellectual property. As a food startup, you can protect your brand name, products, or even methods in which you create your food product (for a more detailed explanation, check out our article on general food patents). You have an array of intellectual property possibilities available to your startup—and it can be the deciding factor when VCs look to invest in your startup.

Food tech trends are here to stay—and so is the competition. We advise you to begin thinking about intellectual property protection, even if your food startup is still in the early stages of development.

If you’re not sure whether your startup’s intellectual property can be protected, and would like to schedule a free 30-minute consultation to discuss your food startup’s strategy, we’d be happy to help!

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