UK-based venture capital fund The Conscious Fund wants to change how we think about psychedelics. The fund invests in early-stage life sciences ventures with a focus on the emerging psychedelic medicine space — specifically, those companies focused on mental health, addiction, and pain.
Founded by Richard Skaife, a venture capital veteran and pioneer in mental health, Michael Hoyos, founder of Kensho Ventures, and Henri Sant-Cassia, a tech and cannabis entrepreneur, the Fund is poised to elevate the conversation around psychedelics and reduce the drug-culture stigma.
More than a dozen companies are currently in the fund, including Numinus, Cybi, Atai, MagicMed, and Wesana Health. Psychedelic Spotlight’s parent company, Global Trac Solutions, is also an investor into the fund.
“Our fund grew from a serendipitous meeting of minds,” says venture partner Rami Mustafa. “In the very earliest days of the European cannabinoid market, and during the height of the US and Canadian green rush, our founding partners were running startups in the space. By chance, they came together through a leading deep tech fund, and the idea of creating a specialised plant medicine fund began to take shape. We found the sentiment amongst investors was positive. They were enthusiastic about the sector but were wary of taking risks on single companies, and most lacked the specialist insights needed to vet and scale new ventures. Thus, The Conscious Fund was born.”
Now, the fund is focused on identifying ways to improve mental health treatment options. “These startups are addressing the global mental health and addiction, epidemic, which today directly affects nearly one billion people,” says Mustafa. “We believe that this new class of therapies has the potential to move the needle in terms of addressing the crisis by materially improving patient safety and treatment outcomes.”
Investing in psychedelic medicine is not without its risks, though, Mustafsa says. “As with any asset class, hype bubbles can drive poor investment choices, spurious companies may jump on the bandwagon, and it could become easy to fall victim to misinformation.” Part of that comes due to the pace at which the sector is growing. “The sheer speed of the advances the sector to date is enough to make even the most sophisticated investors feel a bit overwhelmed,” he says. “Investors face the challenge of wading through an intimidating volume of scientific and legal due diligence for each opportunity while resisting the temptation of FOMO-driven hype cycles and the risks associated with them. However, as the industry matures we expect there will be an increasing number of ways for the average investor to increase their exposure in a balanced way, like with the new psychedelic ETF which recently launched in Canada.”
The Conscious Fund works by investing across an index of companies in the psychedelic medicine space. It’s identifying leaders in drug development, treatment centers, as well as leaders in technology, CPG, and adjacent categories. Because of the sensitive nature of the fund, all candidates go through a detailed screening process; due diligence takes into account the work, the team, and the long-term goals of the companies. It’s targeting 20-30 investments in the medium term.
“We prefer to work with balanced teams that consist of technical founders with deep subject matter expertise in their respective fields and non-technical founders with robust finance, operations, and management experience in similar ventures,” says Mustafa. “Our preference is to back founders with clear track records of success in their domain and ideally those that have track records of successfully starting and exiting companies in the past. We also want to work with visionary leaders that plan for the future and know what steps are needed to get there. These leaders have given a great deal of thought to how they want their companies to evolve and what they want the business to achieve both operationally and financially, clearly laying out relevant and actionable goals, milestones, and timelines.”
“From an investment point of view we are at an interesting inflection point in the growth of this nascent industry,” Mustafa says. “The FDA has already approved an esketamine nasal spray (Spravato) as a treatment for treatment-resistant depression and suicidal ideation and clinical trials involving MDMA and psilocybin are looking increasingly likely to receive approval in the near future. Companies are increasingly able to command significant investment with many oversubscribed rounds and go public financings that have resulted in the first billion-dollar market cap companies in the space. On a risk-adjusted basis now is a very compelling time to back entrants while we are still in early innings of what we project will be a massive market over the coming decade. As more approvals start coming in, early-round valuations will begin to rise significantly and the potential for outsized gain will be diminished.”
This, Mustafa says, makes the industry ripe for growth. “The psychedelics investment market is on pace to keep expanding and commanding the attention of more of the world’s best talents in 2021,” he says. “With this uptick in attention, expect more high profile individuals and organizations to join in the industry and its goals of bringing these new treatments to patients around the world.”
Learn more about The Conscious Fund here.
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