Exo secures $4m in financing round led by AccelFoods, plans move beyond cricket bars
The cash from the Series A financing round - led by incubator AccelFoods and Collaborative Fund, a syndicate led by author Tim Ferriss, rapper NAS and athlete Amelia Boone – will be spent on helping New York-based Exo launch new products, hire new staff, and expand its marketing efforts, said CEO Greg Sewitz, who co-founded Exo with Gabi Lewis in 2014.
EXO does not disclose revenues, but is currently notching up triple-digit growth Sewitz told FoodNavigator-USA.
The bulk of its revenue is still generated online, via its own website and other platforms such as Thrive Market and Amazon, but the cash injection will help it build relationships with bricks & mortar retailers as well, he said.
“Having a direct relationship with our [end] customers has been really valuable and our online subscription service has been very successful, but we want to get into more bricks & mortar stores as well as right now it's really just a fraction of our business. But it's not about store numbers. The plan is to go deep with a couple of retail partners rather than going wide with many."
“We’ve talked to every one of the major strategics. They are definitely interested in cricket protein and while it’s probably too early for them to jump in at this stage of the category’s evolution, I definitely see something happening in the next year or two.” Greg Sewitz, co-founder, Exo
New products to come
Exo is also planning to launch new products this year, he said: “We launched Exo not as a protein bar company, but as an alternative protein company, that’s always been the vision. It made sense to start with something familiar and accessible like a bar, which also makes sense [from a commercial perspective] as many people eat proteins bars as part of a routine [rather than an occasional snack/treat].
However, if the edible insect movement is to meaningfully impact the protein market by displacing other animal-derived protein sources that are less sustainable, cricket companies will have to move into new areas over the longer term, he acknowledged.
“People are replacing say, soy or whey protein with cricket in bars, and maybe eating cricket bars instead of beef jerky. But down the line we do envision products in a broader set of categories and we’ll have news on that in the next few months.
"The flavor [of cricket protein powder] is fairly mild, so the limiting factor is more about texture – so for example, with chips, you can’t add as much as you would in a bar, for example.”
We need to expand the movement beyond early adopters
As for marketing, despite the ton of free PR that Exo, Chapul and others have garnered thanks to the novelty factor of selling bug bars, most Americans are still learning about edible insects, he explained.
“One of the biggest challenges we still face is to get the word out around eating insects and then convincing people that it makes sense. We need to expand the movement beyond early adopters and health & wellness people and go after a more mainstream audience.”
So who is buying Exo bars today?
According to Sewitz: “We’re about 60:40 male: female, aged 25-40, which is not actually that different a profile from people that buy protein bars generally, although it’s slightly more female-skewed. But what’s driving our growth is that we offer healthy delicious products – if you don’t do that, you’re dead on arrival in this market. The cricket factor definitely drives trial, though.”
We’ve also seen a lot of new players come into the market thanks to crowdfunding sites like Kickstarter
As for sourcing cricket powder (milled crickets), he said, “When we started there really were no farms raising crickets for human consumption, but there were pretty large ones raising (live) crickets for the petfood industry, so the concept of cricket farming on a large scale was already proven out.
“Now there are five large farms that raise crickets exclusively for human consumption that have made improvements on the original model, but undoubtedly it’s still more expensive than some other sources of protein.
"It’s still a bit like we’re selling a beef jerky product when there are only two cattle ranches in the US.
"But look how long these other [protein-based] industries have spent driving efficiency, we’re still just at the beginning.”
He added: “The fact that we are attracting all of these influencers to the cause really gives me confidence that we're building a movement here. We’ve also seen a lot of new players come into the market thanks to crowdfunding sites like Kickstarter, and I don't think that would have been possible a few years ago.”
Exo took part in AccelFoods' inaugural accelerator program in 2014 and has since built a strong online subscription model, said AccelFoods' co-founder and managing partner Jordan Gaspar (pictured left).
"This is true innovation in the food space with transformative global implications."
We’ve talked to every one of the major strategics
Echoing comments made by fellow cricket bar pioneer Chapul Foods last month, Sewitz noted that larger CPG companies are watching the edible insects category closely with a view to investment, partnership or acquisition should it continue to grow, he predicted.
“We’ve talked to every one of the major strategics. They are definitely interested in cricket protein and while it’s probably too early for them to jump in at this stage of the category’s evolution, I definitely see something happening in the next year or two.”
