Forget software bugs, this startup is focused on insects that could change the agriculture industry

Beta Hatch founder Virginia Emery stands among the stacked trays full of mealworms in a grow room at the company’s facility in SeaTac, Wash. (GeekWire Photo / Kurt Schlosser)

Some of the most intriguing farming in Washington is taking place not among the valleys or rolling hills of the eastern part of the state. It’s happening indoors, in an industrial area of the city of SeaTac, south of Seattle. There are no crops, and no livestock. This startup is growing insects.

Beta Hatch is the 3-year-old brainchild of Virginia Emery, a PhD entomologist who has turned her focus to entrepreneurship in hopes of changing the agriculture industry — and perhaps the world — by changing what animals eat.

Feeding our food is a costly business. According to Beta Hatch, 30 percent of crop production goes to feeding livestock, 60 percent of feed and food ends up being wasted and feed makes up 50 percent of the cost of meat.

Mealworms are Emery’s answer.

“Food is very cheap. People expect to not pay a whole lot for it, but it’s expensive to produce,” Emery said. “Insects as part of the base of most food chains makes a lot of logical sense, but it hasn’t really made a lot of economical sense — yet. This is the problem that we’re working to solve.”

Mealworms are ideal food for chickens and farm-raised fish, and Beta Hatch raises lots of them. (GeekWire Photo / Kurt Schlosser)

That work had initially been done at a makeshift pilot facility, upstairs from an auto-body shop and just across the street from where a new 5,000-square-foot pre-commercial operation is now up and running.

It is here that Emery and her small team of fellow scientists are bioengineering better bugs, perfecting the process of breeding darkling beetles (Tenebrio molitor) and streamlining everything from mating to feeding to processing and packaging.

It’s a first-of-its-kind farm in Washington and the second largest insect farm for livestock feed in the nation behind Ohio-based Enviroflight.

“We’ve done a lot of experimentation with different strains of mealworms, basically running the mealworm Olympics to figure out who’s performing best,” Emery said. “What we’ve been trying to do is breed the biggest, fastest growing, most nutritious insect.”

Virginia Emery holds a handful of darkling beetles, the insect that she mates and has built her business around. (GeekWire Photo / Kurt Schlosser)

The target audience is chickens and farm-raised fish, where mealworms would serve as a replacement for feed that is traditionally animal proteins such as fish meal and fish oil. Beta Hatch’s biggest customer right now is the pet supply industry and the flourishing backyard chicken market, and they’ll be distributing specifically through a company called Chubby Pet Products.

“Chicken and fish would much rather eat a bug than a processed soy pellet,” Emery said. “They call mealworms ‘chicken crack’ because they go crazy for it. They love insects, which makes sense, it’s a natural part of what they would eat in the wild. So that hasn’t been the problem.”

The challenge has been a lack of scale in production and lack of technology. As an indoor farming operation there needs to be very good control over the process, specifically as it relates to climate. And the environment needs to be contained so that what’s being grown inside doesn’t attract what’s outside.

Bug netting is hung between one end of the Beta Hatch facility and another, because keeping bad outside bugs away from the good bugs is essential. (GeekWire Photo / Kurt Schlosser)

“You create a paradise for bugs, so everything wants to live there,” Emery said. From a grow room where the temperature is 80 degrees and the humidity is 80 percent, she exits and turns a corner to enter a walk-in freezer where bags of feed for her bugs are stored at 9 degrees.

Beta Hatch farms more than just mealworms as feed. The company is also collecting what the insects produce, turning their manure, or frass, into the second half of the business.

The protein-rich fertilizer is good for indoor or outdoor plants and Emery said Beta Hatch produces close to three times as much frass as mealworms, accounting for half of her revenue.

“We’re just as much a fertilizer company as a feed company,” she said.

Virginia Emery works a forklift in a grow room at Beta Hatch. Stacking trays of insects and maximizing production space will only become more essential as the operation scales. (GeekWire Photo / Kurt Schlosser)

The SeaTac pre-commercial facility will be able to produce 10 times what Beta Hatch has been outputting thus far, and the planned commercial facility would go up another 30 times, going from a ton a month of mealworm production to a ton a day.

“This is a miniature version of what we’ll be building next,” Emery said from SeaTac.

She’s targeting 2019 and a 30,000-square-foot space in Cashmere, Wash., as the next location — with a price tag of $8 million to build it all. Being in a community where the focus is agriculture is appealing to Emery, as is the cheaper labor, land and electricity.

The Beta Hatch pre-commercial facility sits among a nondescript strip of businesses in SeaTac, in line with the nearby airport’s flight path. (GeekWire Photo / Kurt Schlosser)

As a home beer brewer, Emery also appreciates that her current operation is reminiscent of the many small breweries which seem to populate the Seattle area these days.

“In terms of brewing, it’s such a good analogy because there is a hobby industry around growing insects that’s sort of very similar to home brewing,” she said. “I would say we’re right now at sort of a craft brewer stage of scale and then we’re trying to move next year into that full scale … to a ‘Budweiser’ facility.”

Beta Hatch has gotten a helping hand in terms of scaling with the recent addition of Lisa Newman as its first chief operations officer.

An Oxford-educated biotechnologist and longtime agriculture professional, Newman has extensive experience in controlled, indoor farming and scaling operations for commercialization. She spent 13 years at DuPont Pioneer, where she designed and built a 140,000-square-foot fully automated greenhouse.

Beta Hatch has also been awarded a Small Business Innovation and Research phase 2 grant from the National Science Foundation. The $630,000 grant will go toward R&D of new insect rearing trays; development of reusable materials for its breeding program; and development of automated feeding and watering systems. Their first grant from the NSF was near $250,000. The startup also raised a seed round of $2.1 million last year, led by the agriculture firm Wilbur-Ellis.

Virginia Emery poses in front of a mural at Beta Hatch which captures the mealworm life cycle as well the bucolic farm setting she dreams of creating. (GeekWire Photo / Kurt Schlosser)

Emery has been thinking about the edible insect space since her third year of grad school. Like many entrepreneurs, she called the decision to start a business a leap of faith, and she’s had to learn a lot in transitioning from science to business.

“The challenge has been a lot of the startup dialog is around software, especially in Seattle,” Emery said. “The models for growth and for technology innovation are not directly applicable to what we do. It’s different than a hardware business, where you design something, you get a factory in China to manufacture your gizmo, you sell it.

“We’re creating something totally new, we’re creating a new supply chain,” she added. “It means that we look to manufacturing businesses, we look to food processing businesses, we look to livestock production, we look to other businesses for inspiration. I have a lot more in common with a farmer in the Midwest than I do with a software startup developer here in Seattle.”