Where’s the beef? Raising money in psychedelics

Admittedly, I have had mixed success helping psychedelics companies raise money – for good reason. The salad days of 2020 are over.  More importantly, investors have become more discerning with the companies they invest in.

In my experience, firms will be challenged attracting Seed & Series A funding if they make these missteps:

1.     Have an investment thesis and management team that is overly optimistic around market sizing (too big), regulatory approvals (bias towards quick, favorable rulings) and efficacy & toxicity (too early to tell) and time-to-revenue (too fast).  Fact is, no new psychedelic will be legalized before 2025.  And psychedelics will be a second (at best) or more likely a third-line therapy given the realities of cost, physician education, prescribing habits, and contraindications;

2.     Have vanilla go-to-market strategies.  Most of these young strategic plans lack focus, relevant market differentiation and detail around target therapeutic areas, pharmokinetics, channel considerations, and patient segmentation;

3.     Are unclear around their IP plans regarding securing patents, knowledge capture and data exclusivity;

4. Have unrealistic exit expectations.  The capital markets are a challenge right now. Market consolidation is around the corner. Leaders need to get real with how they will maximize shareholder value come IPO/RTO time and when strategic buyers could come knocking.

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