What Investors Consider Before Investing in Psychedelic Startup Companies

October 5, 2021 10:05:49

In the last few years, venture-capital funds have played a big role in facilitating the establishment of psychedelic firms. To do this, those VC companies have had to go through many business models and pitches.

Research shows that the top investors in the psychedelics industry since the beginning of last year are Neo Kuma, Palo Santo and Noetic Fund. They have injected the most capital into psychedelic startup firms. In total, the three companies deployed roughly $85 million into these startups.

Today, we’ll look at some of the variables these companies took into consideration as well as the qualities they focused on before they injected funds into these startup companies.

Neo Kuma co-founder Clara Burtenshaw stated that a winning and clear market strategy and an experienced team were important factors to consider. She explained that a company being in possession of defensive intellectual property and a team with expertise in drug development was important in drug discovery, adding that it helped if the treatment the startup was developing targeted an illness that had a significantly unmet medical need.

Burtenshaw also noted that being excited about the product the startup was developing was a plus, mentioning that a startup that couldn’t explain or didn’t have a sold clinical-trial design was a red flag.

Palo Santo co-founder Tim Schlidt agrees, stating that a well thought-out commercial strategy and approach, good internally generated data and a management team with biotech experience were important factors to consider when vetting biotech firms that are engaged in the development of psychedelic treatments. Schlidt explains that intellectual property was a crucial part of a firm’s commercial strategy and approach, noting that having a pricing plan for when the drug would be approved was an added advantage. He added that a startup firm that had no biotech experience among its management or those that posted unreasonable valuations was a red flag.

Noetic Fund managing partner Sa’ad Shah asserted that he looked at the resources available to the startup, their management and optionality, adding that he also looked into how well the founders knew their industry and their business. He explained not being in possession of even basic knowledge of the substances or the psychedelics space was a red flag. In addition, Shah explained that he invested in firms in the subsector that would fit into Noetic’s bigger portfolio as well as in the larger psychedelics industry.

Companies just starting out in the psychedelics industry would do well to learn from the experiences of entities such as Cybin Inc. (NYSE American: CYBN) (NEO: CYBN) that can now more easily access large amounts of resources for their activities.

NOTE TO INVESTORS: The latest news and updates relating to Cybin Inc. (NEO: CYBN) (NYSE American: CYBN) are available in the company’s newsroom at https://ibn.fm/CYBN

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