Cannabis is only on the cusp of many investors’ comfort zones, but the family offices and high-net-worth individuals hungry for early stage, edgy investments have already moved on to psychedelics.
Marijuana’s legal headway in recent years has paved the way for new interest in remedies typically relegated to the black market. Companies that work with drugs like psilocybin, an ingredient in magic mushrooms, or Ibogaine, used in ayahuasca-style ceremonies, are proliferating, with early-stage investors predicting such substances have an even better shot than cannabis at disrupting the US$70-billion market for mental health. The question now is whether such aims bear out —and in time to catch up with all the money flowing in.
“People see this potentially as a get-rich-quick mechanism, just like you saw in the early stages of cannabis,” said Sa’ad Shah, who runs Grey House Partners GP Inc.’s Noetic Fund, which has invested in more than a dozen psychedelics companies. While Shah’s background is in asset management, he said lots of VCs in the psychedelics space have recently come from marijuana. “They feel they don’t want to have another FOMO situation here,” he said, referring to a “fear of missing out,” like they did with early-stage cannabis plays.
The overlap between the two sectors is clear. Both involve substances that are federally illegal in the U.S. and in many other countries around the world, putting off most institutional investors and leaving the playing field to high-net worth individuals and family offices.
Yet there are also huge differences. Psychedelics, which can involve intense, side-effect-plagued trips, aren’t predicted to have the widespread recreational appeal of marijuana. And with all the talk about micro-dosing as a productivity-booster or mood-hack — which has little to do with the narrow regulatory pathways these psychedelics startups are treading — there’s a fear the market could see a bubble just like cannabis did.
psilocybin-research.com
