December 4, 2019 6 min read

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It’s a wild time to invest in alternative medicine -- just think about how much wealth has come from the widespread legalization of CBD and expanded access to full-spectrum cannabis in recent years. As we observe the successes and failures from these first-wave ventures, investors are now identifying a natural link to the early (yet potentially explosive) world of commercial psychedelics.

Why? Similarly to how people are using cannabis and CBD to treat themselves, these compounds are positioned to become the next big thing in mental health treatment.

Psilocybin, LSD and MDMA are being recommended as potential treatments for anxiety, depression and C/PTSD by a growing number of reputable institutions, with research indicating that these compounds could also have far-reaching effects for people struggling with substance abuse, smoking addiction or processing grief. The psychedelic-psychiatric breakthrough happens when you take one of these drugs, resulting in a dissolution of the ego, which can lead to a new perception of reality and one’s place within it.

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Wherever You Go, There You Are

Scientist Albert Hofmann, the first known person to synthesize LSD (and several other powerful psychedelic compounds), argued passionately against the public’s casual recreational use of these drugs during the 1960’s and 1970’s. Hofmann’s initial discovery of LSD was set aside for five years until April 1943, when he returned to his earlier therapeutic research on the compound.

At the core of Hoffmann’s theory is the idea that psychedelics can aid an individual in readjusting their perspective, ultimately leading them to the realization that they are a small part of something much, much bigger than themselves. Side effects of this experience can include feeling deeply connected, an increase in empathy, confidence to approach situations in a new way and a reinvigorated sense of purpose. This reframing can be a powerful tool in the psychological treatment process. Similar to CBT or EMDR, psychedelics are being looked at as a kind of hard reset for patients living with a wide variety of complex mood disorders. For many people, the “trip” can be a life-changing experience.

A Long, Strange Trip Begins

Researchers are already discovering the great potential psychedelics have for public health.

Rick Doblin, Ph.D., founder and executive director of the Multidisciplinary Association for Psychedelic Studies (or MAPS), has been working the line between psychedelics and psychotherapy since 1986. Doblin’s team is focused on advancing critical professional dialogue around the study of psychedelics as a treatment aid for trauma, PTSD, schizophrenia, depression and more. It’s essential to support research from institutions like MAPS to help legitimize, understand and properly apply psychedelic treatments in psychotherapy.

Johns Hopkins University recently opened a new Center for Psychedelic Research thanks to a $17 million gift from donors. Paul B. Rothman, Dean of the Medical Faculty at the Johns Hopkins University School of Medicine and CEO of John Hopkins Medicine, is optimistic about this new field of medical, psychiatric and pharmaceutical research. “Our scientists have shown that psychedelics have real potential as medicine,” he said, “...and this new center will help us explore that potential.”

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More Questions Than Answers

It’s natural at this stage to feel apprehensive in regards to investment in a new pharmaceutical sector. Is it legal? Does the industry have financial backing? How do you even begin to find a scientist to work on a project like this? Let’s take a look at where we are in North America today.

Denver, Co. and Oakland, Ca. both recently decriminalized possession of psilocybin, and legislation has already been drafted in many other locations across the United States.

Canada’s first psychedelic VC fund, FieldTrip Ventures, recently launched. The goal of a fund like this is to have products ready to launch in the days and weeks leading up to legalization, proving that the “early days” of this emerging market are already here.

Pharmaceutical companies are already actively developing psychedelic patents. Earlier this year, the U.S. Food & Drug Administration approved Johnson & Johnson’s ketamine-derived nasal spray, Spravato, for treatment-resistant depression.

ATAI Life Sciences is an interesting case, as the founder’s family offices (Apeiron Investment Group, HCS, Galaxy Financial) seed funded the start-up in 2018. ATAI recently closed a Series B financing, and has raised $80 million to continue research and development within the space.

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Minimize Risk When Investing In Futuristic Technology

Think Clinically. Governments will likely try to keep experimentation limited to highly controlled, supervised scientific environments. To make the case for effective treatment of extremely complex psychiatric disorders, it’s critical to couple psychedelic drug therapy with talk therapy or professional therapeutic guidance, so it’s also likely that states will have to require a kind of rehab-like protocol for administering the drug to collect research. These in-patient facilities (or maybe even an on-call shaman), will become the dispensaries and delivery services of the psychedelic realm.

Embrace Science. Scientists and researchers are the most necessary element in building a case for the legalization and commercialization of psychedelics. Many cultures over thousands of years have created supervised ritual journeys based on the psychedelic journey, yet one common truth remains: scientific regulation is a very necessary step on the industry’s trip to success. Even as we speak, scientists are engineering bacteria to produce biologically-derived, lab-grown psilocybin, and there is a huge opportunity for entrepreneurs to improve upon the delivery method of these compounds.

Only Invest In Brands And People Who Execute. Talent matters more than the idea. Early entrants in the psychedelic capital game are fortunate to have proven business models from the recent commercialization of the cannabis industry to work from, and shouldn’t be afraid to hire talent from the cannabis industry. If investing, find a team or project that is mission-aligned, loves the work and is committed to building successful ventures in this new industry; even if it’s from the ground up.