The risky business of psychedelics

Some $2-billion was invested in the above-ground psychedelics “industry” last year. That’s stunning when you stop and think about it.

Most psychedelic drugs — LSD, psilocybin, MDMA — remain not merely illegal but Schedule 1 substances, according to the DEA. That means that they have “no currently accepted medical use and a high potential for abuse,” the government says.

No psychedelics company is profitable, as best as I can tell. Most have no revenues. Their business models are highly speculative–no one knows whether insurance companies will pay for treatments, and efforts to patent drugs like psilocybin that have been used by indigenous people for decades or centuries have met stiff resistance.

Still, the dollars are flowing in. That’s because investors and entrepreneurs alike believe that these drugs have enormous potential to alleviate suffering from PTSD, depression, anxiety and other mental health disorders. They’re embracing the risks, in large part because FDA-sanctioned clinical trials of these medicines have produced exciting results.

In my latest story for Medium, I talk with the founders of a venture capital firm called Palo Santo that has raised about $42 million and invested in 28 companies. Like many in the sector, they grew excited about working with psychedelics after experiencing the power of the drugs themselves. You can read my story here.