What to know about the booming psychedelics industry, where companies are racing to turn magic mushrooms and MDMA into approved medicines
- In the early days of the industry, nonprofits and scrappy startups made up the psychedelics space.
- Now, companies are raising millions from investors and going public on major exchanges.
- Here's what you need to know about the booming psychedelics industry.
The psychedelics space is booming.
Over the past few years, startups focused on turning psychedelic compounds into approved medicines have raised hundreds of millions of dollars from private investors and dozens have gone public.
Research on compounds like psilocybin, the active compound found in magic mushrooms, and MDMA is resurfacing after years of neglect amid the war on drugs. Meanwhile, organizations like the Multidisciplinary Association for Psychedelic Studies are finally inching closer to receiving approval for their treatments from regulators.
As companies get closer to receiving approval from the Food and Drug Administration to bring their psychedelic treatments to patients, they've also been planning out their patent strategies to carve out their share of the market.
Here's a look at the booming psychedelics industry:
VCs have deployed millions into psychedelics startups — here's what they say will happen next
Venture-capital investors have been at the center of the psychedelics boom. In early 2020, startups in the space said they were beginning to see signs that investor appetite was growing, sparking a "psychedelic renaissance."
Soon, VC firms focused on psychedelics companies began to emerge. Insider's list of the top 11 venture-capital investors in the space collectively deployed $139.8 million into startups in just a few short years.
We're also beginning to see more mainstream biotech investors wade into the psychedelics industry. RA Capital alone has invested in three psychedelics startups since 2021. Partner Andrew Levin told Insider that he's looking for companies with short acting drugs that can be given without extensive supervision.
Some psychedelics VCs, however, are still wary about entering the newest psychedelics space: Oregon's soon-to-be-legal magic mushroom market. Four investors told Insider that they're worried it could be hard for companies in this market to turn a profit, and that magic mushrooms will still be illegal under federal law.
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Top VCs in psychedelics say Big Pharma is knocking at the door — and it could fuel a wave of deals
Mainstream startup accelerators are also eyeing the space
In a signal that the psychedelics space is becoming mainstream, startup accelerators known for investing in tech, retail, and healthcare are jumping in.
Famed startups accelerator Y Combinator is dabbling in psychedelics: the organization has accepted at least four startups into its program. Insider spoke to three of the startups to ask them about their experiences and the advice they would give to other founders.
Founders Factory, an accelerator that's worked with companies like L'Oréal, Johnson & Johnson, and Marks & Spencer, is another mainstream player that's eyeing the $100 billion industry.
The organization is partnering with psychedelics company Woven Science to to support a handful of early-stage startups focused on psychedelics-based mental-health treatments.
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CEOs set the tone for the burgeoning space
A slew of companies have entered the psychedelics industry, but a few stand out as frontrunners.
In February 2020, Atai CEO Florian Brand said that he was turning to pharma and biotech investors as the company looked to further grow. At the time, Atai was a private company that made headlines for winning over backers like Mike Novogratz and Peter Thiel.
In 2021, the company raised a record $157 million, pushing psychedelics further into the mainstream. But there have been challenges for the giant since then. In January, Atai announced disappointing results from a much-anticipated trial for a ketamine-based treatment which was being tested to treat treatment-resistant depression.
Compass Pathways, which is testing psilocybin, the psychoactive compound found in magic mushrooms, started late-stage trials for its treatment in late 2022. The company's new CEO Kabir Nath told Insider in November that data from his firm's upcoming clinical trial could finally persuade Big Pharma to take a serious interest in the psychedelics industry.
Change has also been bubbling on the state and local levels. In 2020, Oregon legalized psilocybin for therapeutic purposes — but that doesn't mean you'll see the giants rush in.
The biggest companies in the space told Insider they were focused on seeking approval for their experimental substances from the FDA.
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Startups are raising big sums for drug development and clinics
Drug development takes a lot of capital, and startups are focused on getting the funding they need.
Insider got ahold of three pitch decks that companies used to raise tens of millions of dollars. Beckley Psytech raised $18.6 million in 2020 to develop a slew of new treatments focused on rare diseases and mental health.
Compass Pathways raised $80 million from investors like Founders Fund in 2019, fueling its rise to the top. Insider charted the company's origin story and eventual rise to become one of the biggest and most controversial companies in the space.
Meanwhile, startups focused on clinics, where psychedelic treatments are expected to be administered, are raising capital too. Novamind raised $7.8 million with this pitch deck.
Select companies are also seeing investments come in from big investors, despite a tough market. In 2022, Y Combinator alumnus Mindstate Design Labs raised a $11.5 million round from VC firm Initialized Capital and angel investors like Max Hodak. Gilgamesh Pharmaceuticals raised $39 million in December to develop new psychedelic treatments for depression.
Another way to get access to capital is to go public, and there are now dozens of psychedelics companies in the US and Canada. We broke down the 7 companies with the biggest market caps and laid out their business models, drug pipelines, and timelines to get treatments to market.
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The top startups are racing forward
Private startups are still a core part of the space.
Insider published a list of the psychedelics startups that raised the most cash in 2020. The 14 names on that list raised over $222 million.
The biggest investors in the space told Insider in 2021 about their favorite 15 startups in the space. In 2022, we asked three top female VCs in the space that same question, and they came back to us with seven names.
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VCs name the top 15 startups in the psychedelics industry
As drug discovery and development heats up, companies are using patents to raise money and protect market share
Psychedelics treatments based on psilocybin and MDMA are inching closer to FDA approval.
In 2021 Compass Pathways, one of the few psychedelics companies in mid-stage trials of its psychedelic treatment, released data on its midstage trials for its a synthetic version psilocybin, the psychoactive component found in magic mushrooms, to treat treatment-resistant depression.
Compass is also in the midst of a brewing debate over the role that patents should play in the world of psychedelics, which has traditionally been a field defined by open science and natural compounds. Critics say the psychedelics giant is attempting to dominate the industry with its overreaching patent strategy, while Compass says it is only using patents to protect new inventions.
But virtually every company developing psychedelics as FDA-approved treatments is employing a patent strategy to protect its market share and raise money from investors. Patent lawyers told Insider that a slew of patent disclosures could determine the winners and losers of the space.
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Experts share how a brewing fight could shape the future of the $100 billion psychedelics industry
The future of the psychedelics industry hinges on patents. Whoever wins could make billions.
Academics, lawyers, and analysts are wading into the burgeoning space
Meanwhile, it's not just investors and companies that are building out the foundation for the industry.
Academics have continued to publish promising studies on the benefits of psychedelic compounds. New research in February revealed how psychedelics can physically change brains by helping grow the "branches" of animal brain cells.
Wealthy philanthropists are responsible for the rush of funding entering academia as prestigious universities set up psychedelic research centers. One scientist told Insider that as psychedelic research has emerged from the fringes, donors have begun to catch the "psychedelic bug."
"What psychedelics seems to do is, when it grabs you, you really seem to get it," he said.
In March 2022, Johns Hopkins, Yale, and NYU announced they were collaborating to create a psychedelics curriculum for psychiatrists. The goal is to have the curriculum certified by the Accreditation Council for Graduate Medical Education, which would create a pathway to make the program available to medical schools as an accredited specialty all across the country.
Academics are also running clinical trials to determine how effective psychedelics are at treating various mental health issues. The results from these trials, which could eventually lead to FDA approval for psychedelics, could make or break the industry. Here are the 22 clinical trials that are trying to pave the way for using psychedelics as medicine.
Lawyers and analysts are also wading into the space. As a slew of companies began to go public, analysts at investment banks began to cover the industry. Lawyers originally focused on cannabis clients also took the plunge.
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The 22 clinical trials that could make or break the future of the $100 billion psychedelics industry
A landmark study shows the main compound in magic mushrooms could rival a leading depression drug
Female academics, VCs, and CEOs are making a mark in psychedelics
Women working in psychedelics are shattering the status quo and shaping the industry.
Insider identified 16 women making a mark in psychedelics, from scientists to CEOs, and asked them what they thought the space would look like in five years.
We also asked what worried them about the industry as it scaled. Concerns included unsubstantiated claims, the potential for harm, and inequitable access.
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Meet the 16 most influential women shaping the future of psychedelics
As Oregon's psilocybin market prepares to launch, psychedelics companies are making big moves
Psychedelics companies are pouring resources into Oregon as they seek to gain a leg up in the first state to create a legal market for psilocybin, the psychoactive substance found in magic mushrooms. There are 18 people in particular who are doing the most to shape the new market, from regulators to investors.
While biotech firms have largely said they won't participate in Oregon's psilocybin program, upstarts focused on training, clinics, retreats, microdosing, and other services are racing to take advantage of the opportunity.
One company in particular, Field Trip, announced in May that it plans to split into two independent companies. The move makes it possible for the company to enter Oregon's psilocybin market.
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This article was first published on Aug 3, 2021 and was last updated on March 9, 2023.