How Investing for Psychedelics Companies Has Changed

Psychedelics are a fast-growing industry, primarily funded by private money. But in the last ten years, the people and organizations funding psychedelics startups and studies have changed. Those changes in psychedelics investing have shifted the landscape, not for better or worse, but in a way that we need to be mindful of moving forward.

The Current Landscape for Psychedelics Companies

Psychedelics are an industry on the rise. With increased studies backing their medical benefits and a wave of de-regulation on the city and state level, psychedelics are more mainstream today than ever since the 1950s. 

The pandemic skyrocketed the need for more effective mental health treatments worldwide, creating a boom in cannabis and psychedelics. Since Oregon is coming online as the first state to legalize psilocybin this year, and Colorado will soon follow, it’s safe to say the dark ages of psychedelics are almost over. 

Cannabis has led the way over the past decade, ushering in an age of plant medicine reform. Furthermore, 21 states have legalized recreational cannabis, and 39 have medicinal (including DC), meaning most Americans now live in a state where cannabis is legal in some form. And now, it’s psychedelics turn. 

From Private Donors to Mainstream Investors

As the industry grows and changes, so does the psychedelics investing landscape. At the start of the wave, companies relied heavily on private donors. Historically, these investors supported academic studies, like the donors who funded the Center for Psychedelic & Consciousness Research at Johns Hopkins University. These donors allowed the industry to gain traction as mainstream opinion changed, creating the ability to build a library of validated scientific uses for psychedelics. 

Today, investing is switching. Mainstream psychedelics investors are replacing private donors as the primary form of funding. Instead of focusing on academic studies, psychedelics investors fund individual studies and projects. This reform changes, but does not halt, the evolving landscape. 

Investors are business-minded, always watching the market and the trend forecast to figure out where best to invest. When you combine the above information with the mental health crisis caused by the pandemic and the new regulations in Oregon and Colorado, psychedelics looks like a promising venture. 

It’s worth noting that mainstream investment in psychiatry is rare, even for substances as interesting as psychedelics. It’s thanks to the interest and money of private donors that began funding academic studies that this industry picked up. Now, investors have taken notice.  

How “Vetting” Drives Investors to Action

Investors, by nature, are driven by and for their financial benefit. They seek out deals and businesses that have the best chances of success with the highest return on investments (ROIs). 

But many investors are also risk-takers, continually seeking new horizons, adventures, and business ventures. Sometimes it only takes proof of concept to pique their interest — like psychedelics startups raising $236 million between 2021 and 2022. This influx of cash, combined with the FDA’s interest in psychedelics-based therapies, means many investors are paying attention. 

But more than opportunities is needed. Investors also need to vet companies to ensure that the business plan makes sense, the revenue predictions are accurate, and that a given company could be as successful as they say. Academic studies on psychedelics are one way to vet the industry.  

It was these initial studies that produced such compelling results that even government entities took notice. In 2021, the National Institute on Drug Abuse gave Johns Hopkins University $4 million to run a study on using psilocybin to stop tobacco use, the first government-sponsored study on psychedelics in 50 years. The same year, the NIH awarded a doctor at Yale’s psychedelics research group nearly $200,000, reversing their clear stance against psychedelics.  

Psychedelics investors also have personal criteria for vetting companies. Some companies want to stall legalization to have more time to develop proprietary substances that mimic psychedelics like MDMA. In contrast, others see it as a rising tide to lift all boats. One investment fund, Empath Ventures, steers from investing in companies discouraging the decriminalization and legalization of psychedelics. 

Why Psychedelics Companies Have A Promising Future

To many people (investors included), psychedelics are the substances of the future. Not only are these substances capable of helping people have profound breakthroughs in their mental health, but they’re also not habit-forming. This element opens a new landscape of mental health treatment, a radical departure from how mental health space has traditionally approached treatment.  

And we’re only just getting started. The studies that have shown the most promising results are recreations of studies from the mid-20th century. As we build up the scientific literature on what psychedelics can do, their uses may (and likely will) expand, and there’s no telling just how many conditions psychedelics could treat. 

It’s also not the uphill battle it once was. Cannabis has done much of the heavy lifting in changing minds and regulations around substances that were once taboo. Many more practitioners know and understand the value of plant medicine and want to see more studies. There are also banking and financing options and even options for psychedelics insurance.  

Protecting your psychedelics company can seem confusing; however, we’re a full-service psychedelics insurance brokerage working with carriers worldwide to offer you the best coverage possible. We’re here to help! Please reach out to us today by emailing [email protected] or calling 646-854-1093 for a customized letter of commitment or learning more about your cannabis insurance options.

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