I was already putting some thoughts together on a bold prediction for the upcoming year when the first sign I might be onto something came to light. Sustainable Bioproducts announced their coming out of stealth mode this week with an investment of $33 million for their series A round, backed by major investors ADM, Breakthrough Energy Ventures and French food giant Danone. I think this is just the beginning of investments in single cell proteins (SCP) for 2019.
Over the Christmas break, there was an article in Undercurrent News about the investment surge in companies making protein for aquafeed from insect larvae. According to the article, insect larvae companies received at least $170 million in funding in 2018, 40% more than the previous four years combined. This is a clear sign that investors are understanding the importance of the ‘protein gap’ and the market opportunity this presents, especially for aquaculture.
What is the protein gap? The growth in aquaculture is driving demand for additional protein to feed fish and crustaceans. Estimates are as much as 15 million tons new protein will be needed for aquaculture by 2050. Where is this going to come from? Not fishmeal, certainly- we are already harvesting anchovy and other pelagic species at their maximally sustainable limit and supplies are down 30% in the past decade. Soy and other plant proteins will continue to play an important role, but in a world of increasing resource limits, we simply do not have enough land and freshwater to produce this much more.
While actual production of protein from insect larvae was only a few thousand tons in 2018 (total revenues below $30M), investors believe this will grow to more than a million tons within a decade. There appears to be some traction gaining in the sector with a couple of key drivers for this growth with recent regulatory approvals, an industry trade association organizing and an overall good story to tell from waste to protein.
While the success of the insect companies is encouraging, I believe the more compelling economic case is made by producing SCP from microorganisms like bacteria and yeast. It’s actually dramatically more compelling. BioMar’s Neils Alsted, a 35-year veteran in the industry recently stated, “I think [SCP] is much more promising and we see more in that direction- biotechnology developing new things, fermentation, that is going to be very interesting.” Yes I am terribly biased, however, I think this guy is a pretty good authority on the subject!
SCP is produced using industrial fermentation, a proven technology (think beer!) that is vastly more scalable than raising insect larvae on food waste. The literature I have seen indicates a black soldier fly ‘factory’ can produce around five thousand tons of protein per year. By comparison, our commercial demonstration plant is expected to produce 4 times as much, with lower labor costs and a smaller capex cost-per-ton-of-production.
Other SCP companies can point to a similar ability to scale and will offer a sustainable and traceable product containing quality protein at a higher concentration, at a lower price than BSF. Additionally, companies like ours add biotechnology to enhance the inherent properties of the proteins to make more of a “super feed” ingredient.
Yet despite these clear advantages, SCP companies saw relatively little investment in 2018. I think the main reason for this is most SCP companies are young, maybe only 3 to 5 years old. There is perhaps a perception that our technology is not as far along the development path as insect farms. Another possible explanation is that microbes can be a little more abstract, so the story doesn’t resonate as clearly. Investors might consider “invisible” critters less appealing or even more risky because they can’t see or touch the individual organism.
That will change in 2019. My peers in other SCPs companies are starting to scale in significant quantity. The technologies are maturing. The macros are stronger than ever and the reality of the protein gap will demand that the speed, scale, and efficiency that only microbes can offer. My “bold” prediction is that when Undercurrent News does their year-end review this December, they are going to declare 2019 the “Year of SCP”.