Not many could say that “seeing flies buzzing around a lake of blood at the back of a slaughterhouse in Africa” sparked the idea for a company.
But so it was for Jason Drew, co-founder of AgriProtein. The business has been developed as a contribution to the world’s food system, after Drew spent time study ing supply chains around the world and was concerned with what he found.
“Having always been an entrepreneur and a businessman, I thought ‘hang on a sec, there could be an opportunity here’. Five years later, with most people, including my wife, thinking I was stark raving mad, up to my knees in muck and flies, and we have managed to raise the funds to get our industrial agricultural business together.”
The aim of AgriProtein is to create a natural and plentiful alternative to fish and chicken feed, which is a resource under great strain. The business is built on the fact that vast amounts of nutrient-rich waste are disposed of - be it sewage, manure, abbatoir blood or organic waste from supermarkets or restaurants.
AgriProtein’s facilities take this type of waste - any combination - and feed it to larvae from the eggs laid by its fly-breeding stock.
Its enclosed factories have large cages of flies, which lay their eggs in a particular place. The eggs are extracted and their larvae are reared on the prepared waste nutrients. These larvae then become the natural protein meal which the company has called MagMeal, a fish and chicken feed replacement. First and foremost the business is designed to make the food system more sustainable, but an integral part of it is using waste feedstock that has traditionally been difficult to dispose of.
The waste input can come from a variety of sources, including households, manufacturers and businesses. AgriProtein is already running at a small scale in South Africa, selling to organic farmers. But its first large-scale plant there is scheduled to start operations in 2015 and be in full production in 2016. It is already evaluating sites for a second plant and, depending on the success of the first two, the plan is to roll out a further 38 plants.
This would happen alongside a licensing programme starting in late 2015, with plants being set up across the globe. Enquiries have come in from more than 40 countries, following publicity it received as a winner in the WWF Climate Challenge awards earlier this year, and as a winner of the UNECA Innovation Prize for Africa last year.
Focus in the UK in recent years has been on diverting organic waste towards energy facilities, but for Drew, the global food supply is the bigger problem.
“If you look at what people need, you can make energy out of sunshine or wind, but you can’t make food out of either of those. What is our biggest problem? It’s not energy but food, and what I termed some time ago as the ‘protein crunch’,” he says.
Drew explains that over-reliance on fishmeal in the industrial agricultural system has put the resource under immense strain: “If we fish it too hard and it collapses, then our chicken factories and our fish ponds disappear.” When viewed alongside the prediction that the global population is expected to rise from the current seven billion souls to nine billion by 2050, and you can see the clear business case.
“Turning food waste into biogas is all very interesting but it doesn’t get to the problem that I really see, which is how to keep our industrial agricultural processes going - and the recycling of waste nutrients into feed just as nature does. It is a very old idea - Mother Nature invented it, we just copied it,” he says.
Monogastric animals and fish in the wild, he explains, eat ants, worms and flies as part of their diet: “If you think about any free range chicken or wild fish, it has a diet of larvae and flies. It is an entirely natural process.”
Five or six years ago, Drew started looking at how to farm flies for protein. With the price of fishmeal going up, the idea looked like it could become a reality.
“Since then, the business side has only got better, in theory. But the practical side is always much harder than you think, so it has taken us four or five years to get to the point where we could farm larvae successfully on an industrial scale.”
AgriProtein’s first industrial-scale plant will take 110 tonnes of waste in a day, of which only a small fraction is restaurant waste. This creates 20 tonnes a day of larvae, seven tonnes of MagMeal and 50 tonnes of larvae cast residue called MagSoil, which is used as a soil conditioner. This will be dried to 35% moisture content, reducing it to 20 tonnes. The difference between the input and output is mainly water.
The plant has long-term agreements with larger waste providers, which benefit from not having to pay any landfill fees. In addition, the planned sites - all enclosed - will be semi-urban and in light industrial zones, meaning less distance for the waste to travel.
Drew explains that it is starting in South Africa because that is where the business is based, and because there is “more of an enabling culture there at the government, planning and regulatory environment levels”.
In Europe, there is no legislation covering the feeding of larvae to animals. But it is something Drew expects to change in the next 18-24 months and in the US within 12-18 months. Having plants around the world to supply local food producers, such as chicken farms, is all part of the vision.
The business has also developed a smallscale home kit specifically for rural Africa, in conjunction with a local organisation which developed the funding. This means it can distribute kits at a small cost to local farmers who want to recycle their waste, enabling them to support 10-15 chickens.
But it is at the other end of the scale that Drew wants to operate, so that his plants can supply the likes of chicken farms and therefore have more impact: “We want to tackle the industrial-scale opportunity because that is what will make a difference to the planet.”
He is ambitious in his vision and hopes the business will be a game-changer for industrial agriculture. “It is a nice closed loop system.
Everyone knows that our seas are under pressure and this is a way of addressing some of that over-fishing. We want to save the seas, one fish at a time, by recycling our waste nutrients,” he says. “Within 15 years, we think people will consider it normal to recycle their waste nutrients as they do their paper, tin and plastic today.”
View from the adviser
Investors in it for the long haul
The successful close of AgriProtein’s $11m fund raising is a remarkable achievement given the current investment appetite for early stage waste and sustainability businesses.
While AgriProtein represents a remarkable closed loop recycling technology, the past five years and more have been difficult for pre-revenue companies in the cleantech and waste sectors to raise finance. This is especially the case for companies that are capital-intensive, which is common in the waste industry.
Venture capital funds, which have been the traditional investors in this space, have been moving further down the development path by targeting more mature businesses, with proven technologies, established and scaled revenue streams and a typical turnover in excess of £10m. This is in part recognition of the fact that the road to full commercialisation of new process technologies is often much longer than fits easily within many fund’s desired investment horizon.
By contrast, some family offices (private companies managing investments for a single family) and high net worth investors have a longer term investment horizon and can afford to be patient because they are answering only to their own objectives. And this has proven to be the right source of capital and support for AgriProtein.
In fact, family offices can contribute more than money - they often look specifically to invest in businesses operating in industries in which they can contribute their own expertise and connections, often in the very industry that has created the family or individual’s wealth.
So while it is challenging to identify and connect with the ideal family office investor, the opportunity it can present can make all the difference.
By Rob McGrigor, partner at Kinetix Corporate Finance