Key Learnings from Episode 16: Scaling Insect Protein Beyond the Hype Cycle with James Millar, CEO of Entocycle

In this episode of Beyond the Raise, James Millar shares what the insect protein sector has learned from its first wave of commercial failures. Drawing on Entocycle’s decade of research and development, he explains why industrial climate technologies need the right type of capital, commercially viable business models and credible plans for reducing risk. The conversation also explores changing investor expectations, the transition from R&D to commercialisation and the capabilities companies need as they move from zero to one and beyond.

Insect Protein Addresses a Growing Global Need

Entocycle develops and builds industrial-scale insect facilities that convert problematic food waste into high-value protein for animal feed.

The need for alternative protein sources is being driven by population growth and increasing meat consumption in developing economies. Aquaculture and poultry production are expected to grow significantly, creating greater demand for the proteins used in animal feed.

Traditional sources cannot necessarily meet that demand sustainably. Fishmeal production is constrained by overfishing, while soy production is closely associated with deforestation.

Insects provide an alternative. They can consume food-industry by-products and waste before being processed into protein for poultry and aquaculture.

Key Takeaways

• Growing meat consumption is increasing demand for animal-feed protein.

• Traditional protein sources face environmental and supply constraints.

• Insects can convert food waste into a commercially valuable product.

• The model combines food production with circularity and waste reduction.

Commercial Failures Do Not Mean the Sector Has Failed

The insect protein industry has experienced several high-profile business failures, leading some observers to conclude that the wider sector is no longer viable.

James challenges that interpretation. In new industries, failure and consolidation are often part of the normal process of maturation.

Early investment attracts businesses competing for first-mover advantage and market share. However, developing new technology and infrastructure is difficult. Projects frequently take longer and cost more than initially expected.

James describes the insect protein sector as entering the “trough of disillusionment” within the Gartner Hype Cycle. Some early businesses will fail, but commercially rigorous models can emerge from the correction and support the industry’s next phase.

Key Takeaways

• Individual company failures do not necessarily invalidate an entire sector.

• New industries often experience a period of correction and consolidation.

• Early expectations frequently underestimate the difficulty of execution.

• Commercially disciplined businesses are more likely to survive the next phase.

Scaling Too Quickly Can Expose Weaknesses

Several common factors contributed to the first wave of insect protein failures.

Companies that moved rapidly into large-scale deployment sometimes found themselves conducting R&D inside operational factories. The underlying technology was still developing, making changes more complicated and expensive.

Some business models also depended on customers paying substantial sustainability premiums. When those premiums were removed, the economics came under pressure.

In Europe, insect facilities may compete with subsidised waste-to-energy systems such as anaerobic digestion for their feedstock. High labour and utility costs create further challenges.

When facilities take longer to build, fail to reach capacity or produce less revenue than expected, cash reserves can disappear quickly. Businesses with limited balance-sheet resilience must then return to investors for additional funding under difficult circumstances.

Key Takeaways

• Scaling before the technology is ready can turn factories into expensive R&D environments.

• Sustainability premiums can conceal weaknesses in a business model.

• Labour, energy and feedstock costs must be assessed realistically.

• Delays compound across revenue, operating costs and cash requirements.

Factories Need a Different Type of Capital

James believes the type of funding used across the sector has contributed to its difficulties.

Venture capital is well suited to high-return intellectual property and technology development. Building industrial-scale factories requires a different investment profile.

Infrastructure investors generally look for stable, predictable yields rather than the possibility of a highly valuable but uncertain exit. James expects future insect facilities to be financed in a similar way to waste-management, clean-energy and renewable infrastructure projects.

Private credit and infrastructure finance may therefore become increasingly important as the industry matures.

However, access to this capital brings a much higher burden of proof. Investors need detailed validation of the technology, business model, site, inputs, outputs and expected financial performance.

Key Takeaways

• Technology development and factory construction require different forms of capital.

• Venture capital is not necessarily suited to funding industrial infrastructure.

• Infrastructure investors prioritise stable and predictable returns.

• Greater validation is required before project finance can be secured.

Moving from Zero to Ten Requires Commercial Maturity

James distinguishes between the capabilities needed to take a business from zero to one and those required to move from two to ten.

The earliest stage is centred on invention, experimentation and proving that an idea can work. Scaling industrial technology requires greater commercial discipline and a systematic focus on removing risk.

Entocycle develops projects worth several million pounds that can take up to two years to complete. Customers and investors therefore need confidence that the technology, economics and delivery plan have been thoroughly tested.

James sees his role as helping Entocycle through this later growth phase by transforming a proven innovation into investable, repeatable projects.

Key Takeaways

• Creating a technology and deploying it commercially require different capabilities.

• Large industrial projects demand rigorous commercial planning.

• The burden of proof increases as project values and timescales grow.

• Scaling depends on removing risk rather than selling only the potential upside.

Founders Should Not Believe Their Own Hype

One mistake James has seen founders make is beginning to believe the optimistic version of the business presented during fundraising.

Pitch decks naturally emphasise the potential upside. The operational reality is usually slower, more expensive and more difficult.

Confidence remains important, particularly when building something new. However, founders also need to maintain a realistic understanding of the risks, costs and practical challenges involved.

Drinking their own Kool-Aid can lead founders to overlook problems, underestimate capital requirements and make commitments based on best-case assumptions.

Key Takeaways

• Fundraising narratives tend to emphasise the most optimistic outcome.

• Operational decisions should not be based solely on the investor story.

• Founders need to balance conviction with commercial realism.

• Recognising downside risk helps businesses prepare for delays and additional costs.

Commercialisation Requires a Different Organisation

Entocycle spent much of its first decade as an R&D-focused business. As the technology matured, the company needed to change its people, resources and priorities.

The skills required during research and development are not identical to those needed for commercialisation. Moving into the next stage meant retooling the organisation and making difficult decisions about where its resources should be directed.

Entocycle now has ten years of R&D insight and two years of production data from its London facility. Customer conversations are therefore less focused on proving that the technology works.

The emphasis has shifted towards demonstrating that individual projects can be de-risked and that the assumptions within the business model can be validated.

Key Takeaways

• R&D and commercialisation place different demands on a business.

• Teams and resources need to evolve as the company matures.

• Production data makes customer conversations more credible.

• The focus moves from proving the technology to proving the project economics.

Discipline Means Choosing What Not to Do

Entocycle has become increasingly disciplined about where it invests its time and money.

James is clear about what the business needs to achieve during the next 12 months. Opportunities and projects are assessed against those priorities, making it easier to filter out distractions.

This sometimes means turning down R&D work or commercial opportunities that appear interesting but do not contribute to the company’s essential objectives.

Making those choices removes the possibility of avoiding difficult priorities by focusing on more appealing, but less important, work.

Key Takeaways

• Clear near-term objectives improve resource allocation.

• Not every interesting opportunity deserves investment.

• Choosing what not to pursue is part of commercial discipline.

• A focused strategy creates accountability around the work that must be completed.

Leaner Companies Can Build Stronger Proof Points

The way companies scale has changed significantly.

In the past, a successful funding round might be followed by a large recruitment drive. Hiring and onboarding those employees could take a year before the company received their full value.

Large language models and other AI tools now allow smaller teams to move and iterate more quickly. At the same time, tighter capital markets make it more important for businesses to stay lean.

Fundraising can remove founders from their companies for several months. For early-stage businesses, that creates a considerable opportunity cost.

By remaining lean, founders may be able to reach more milestones before raising. This gives investors stronger evidence, improves the chances of securing funding and may support a higher valuation.

Key Takeaways

• Scaling a business no longer automatically requires rapid headcount growth.

• AI can help smaller teams complete more work and iterate faster.

• Fundraising creates a significant opportunity cost for founders.

• Reaching milestones before raising can improve credibility and valuation.

Founder Involvement Still Matters During Fundraising

Entocycle was founded by Keiran Olivares Whitaker, while James was brought in to lead the company through its next phase of growth.

Fundraising is handled collaboratively. Investors want to hear from the founder because they need confidence that the original leadership remains committed to the company.

They also want to understand the commercial strategy, hiring plans and route to growth, which brings James directly into the conversation.

This approach can become inefficient because it occupies the time of two senior leaders. However, removing the founder from fundraising entirely may concern investors.

James does not believe every founder should automatically hire an external CEO. Some founders make excellent CEOs. The more important requirement is access to trusted advisers who can identify what the business needs at its next stage and hold difficult conversations with the leadership team.

Key Takeaways

• Investors continue to value direct contact with founders.

• Later-stage fundraising also requires detailed commercial leadership.

• Founder and CEO involvement can provide complementary perspectives.

• Strategic advisers can help leadership teams prepare for the next growth phase.

Investor Scrutiny Is Increasing

Higher interest rates and more limited access to capital have changed investor expectations.

Balance sheets, unit economics and data rooms are receiving greater scrutiny. AI may intensify this by making it easier for investors to review company information and identify gaps.

Deep-tech companies also face a timing conflict. Developing and deploying new technology can take longer than the investment cycle of the venture capital fund supporting it.

A fund may need to realise returns before the company has had enough time to prove and scale its technology. James describes this as a structural challenge that the climate technology sector has not yet solved.

Key Takeaways

• Investors are examining financial and operational evidence more closely.

• AI may make due diligence faster and more detailed.

• Deep-tech development can exceed conventional venture fund timescales.

• Capital providers need to understand how long industrial innovation takes.

Business Models Must Work Without Subsidies

If James were assessing a climate technology investment, two factors would make him particularly cautious.

The first is an underestimation of how much capital and time the technology will require. Industrial innovation commonly takes longer and costs more than expected.

The second is a business model that depends on sustainability premiums or government subsidies.

Policy support can help an industry develop, but the underlying economics must eventually stand independently. Businesses remain vulnerable if commercial viability disappears as soon as a subsidy changes or customers stop paying more for sustainability.

Key Takeaways

• Capital intensity and development time are commonly underestimated.

• Sustainability premiums should not be treated as guaranteed revenue.

• Government support can change during a project’s lifetime.

• A resilient climate business needs commercially viable standalone economics.

Companies Cannot Ignore the Industry’s Maturity

James is not arguing that deep-tech businesses should never build pilot facilities. His point is that the appropriate stage depends on the maturity of the wider market.

In insect protein, the first pilots were built several years ago. The sector is now progressing towards commercial and industrial deployment.

A new entrant beginning with its first pilot today may remain several years behind businesses that already possess production data, operational knowledge and patented technology.

Some learning cannot be accelerated simply by adding more money or people. This is known as time compression diseconomies: experience accumulated over years cannot always be recreated in a shorter period.

Businesses entering an established technical field may therefore need to collaborate with an experienced technology provider rather than attempting to develop every capability independently.

Key Takeaways

• The right development route depends on how mature the industry has become.

• A pilot can be necessary without being commercially competitive.

• Operational experience cannot always be accelerated with additional resources.

• Partnerships may provide a faster route than rebuilding established technology.

Partnerships Depend on Aligned Incentives

Joint ventures and collaborations can help companies access technology, experience and infrastructure they could not easily develop alone.

However, the arrangement only works when both parties want the same outcome.

James previously worked in the accelerator sector, connecting start-ups with corporate organisations. He frequently saw partnerships struggle because the organisations had different levels of power, different expectations and different operating speeds.

A start-up may need progress quickly, while a large corporate has less urgency and limited understanding of the pressures affecting the smaller business.

Careful due diligence, aligned incentives and well-structured contracts are essential if a joint venture is to succeed over the longer term.

Key Takeaways

• Partnerships can accelerate access to established capabilities.

• Unequal power and different operating speeds can create conflict.

• Both organisations need to benefit from the same outcome.

• Due diligence and contractual detail determine whether the relationship is sustainable.

Patient Capital Must Still Produce Evidence

Entocycle benefited from investors who gave the company time to develop its technology and build its intellectual property.

James does not present this as the outcome of a perfect early-stage investor-screening strategy. When a company first raises capital, it may know very little about what the business will require several years later.

Entocycle found investors who believed in Keiran, the company’s mission and the need to address the problems within global protein production.

That patience was supported by evidence of continued progress. The company filed patents, reached technical milestones and built an extensive bank of data.

Patient capital does not mean operating without accountability. Businesses still need to demonstrate that the additional time is creating meaningful value.

Key Takeaways

• The right investors can give deep-tech companies time to develop.

• Early-stage founders cannot predict every future capital requirement.

• Mission alignment can support longer-term investor relationships.

• Patience must be accompanied by measurable technical progress.

Commercial Value Must Lead the Next Phase

Entocycle remains a mission-driven company focused on reducing unsustainable food production.

However, James believes the commercial model must now lead conversations with investors and customers.

Political instability, conflict and economic pressure can push environmental objectives down the priority list. A company whose economics work independently can continue creating environmental benefits even when sustainability receives less attention.

This does not mean abandoning the mission. It means presenting a commercially credible proposition while ensuring the original purpose remains part of the company’s decisions and communications.

Key Takeaways

• Sustainability may not remain a consistent priority for customers or governments.

• Commercially resilient businesses can continue delivering environmental benefits.

• Mission and profitability do not need to be treated as competing objectives.

• The balance between commercial value and sustainability messaging requires continual attention.

Looking Ahead

Entocycle is focused on developing de-risked, investable projects capable of deploying insect protein production at industrial scale.

Weather-related disruption to traditional protein supplies increases the need for reliable alternatives. At the same time, the correction taking place across the insect sector may create unexpected opportunities for companies with proven technology and operational experience.

The next phase will depend on verifiable metrics, credible factory ramp-up plans and business models that do not rely on customers paying extra for sustainability.

Final Thought

The first wave of commercial failures in insect protein provides a warning, but not a verdict on the industry.

James’s experience shows that deep-tech companies cannot move from innovation to industrial deployment using ambition alone. They need the right form of capital, years of accumulated learning and a disciplined plan for reducing risk.

The sustainability mission may explain why the company began, but commercial rigour will determine whether it reaches scale.