Six Questions Investors Should Ask When Evaluating Psychedelic Biotech Companies

Six Questions Investors Should Ask When Evaluating Psychedelic Biotech Companies

Every month, we get hundreds of ideas from companies creating psychedelic therapies as a venture business that invests in psychedelics. Startups are working on depression therapies that combine psilocybin with psychotherapy, inventing novel delivery systems such as dissolvable strips and patches, and even producing molecules that rearrange brain circuits without causing hallucinations. Psychedelics, which were formerly considered fringe, underground, illegal, or only used ceremonially by Indigenous cultures, are now becoming mainstream in therapeutic form. Psychedelic medicine is generating new businesses across the healthcare and life sciences ecosystem, including medication development, manufacture, clinics and retreats, telemedicine and other digital therapies, and consumer packaged products.

More than $15 million has been invested in firms exploring psychedelic therapies by our fund. We think that psychedelic medicine, as well as advances in digital medicines, precision psychiatry, and neurotechnology, will transform how mental illness is treated. Psychedelic medication, unlike typical antidepressants and medicines, has the ability to help patients address the roots of their mental health issues rather than simply the symptoms. Psilocybin therapy for serious depression is four times more effective than standard antidepressants, according to a landmark research at Johns Hopkins. Other advantages include their potential to encourage the formation of new brain connections as well as an increase in empathy and openness, both of which are helpful states for healing.

We believe that psychedelic treatment will become as frequent as going to the dentist in the future, but the road will not be simple. We believe that psychedelic treatment will become as common as going to the dentist in the future. But it won’t be easy: psychedelic biotech businesses, like any other biotech company, must undergo multiyear clinical studies that might cost more than $100 million before receiving FDA clearance.

So, how do we decide which firms to back? When analyzing psychedelic biotech firms, we ask six essential questions: Is the team equipped with the necessary knowledge, expertise, and values to bring a product to market? A psychedelic biotech company’s crew is the most critical component that may make or ruin it. Because psychedelic medicine is an interdisciplinary field, the team should have strong backgrounds in psychedelics, biotechnology, neuropharmacology, and/or psychiatry.

That means, unlike typical IT firms, it’s difficult for a brilliant first-time entrepreneur to launch a successful biotech company, given the scientific competence and network necessary, which may take decades. It’s also critical that the team shares our values in terms of patient safety and well-being. We want teams who have psychedelic experience and are well-versed in the history of psychedelics, as evidenced by academic study, field work, or personal investigation. In areas like product development, culture, and recruiting, these businesses will have an advantage over their competitors.