Psychedelics startups are on a long journey to consumer markets, but these 5 VCs are

“Like a pressure cooker, COVID blew the lid off what was a simmering mental health crisis for over a decade,” VC Tim Schlidt told TechCrunch.

According to the World Health Organization, the global prevalence of anxiety and depression increased by a massive 25% in the first year of the pandemic. And when available treatment options showed their limits, both the general public and regulators became more willing to look into alternatives – including psychedelics.

Previously relegated to underground communities and rave culture, drugs like ketamine, MDMA (commonly known as ecstasy) and psilocybin are now being studied to develop therapies to treat everything from PTSD to cluster headaches.

“Today, there are 400+ ketamine clinics in the U.S., and over $200m has been raised over the last two years to open even more,” Dina Burkitbayeva, founder of PsyMed Ventures, said. “Many of these clinics will be sites for MDMA- and psilocybin-assisted therapies, if they are approved, and treatments derived from other molecules as they become available.”

A more favorable regulatory and social landscape is helping psychedelic startups gain a foothold, but they still have to walk a tightrope that’s susceptible to the vagaries of market sentiment. “While there has been a lot of focus on mental health and the promise of psychedelics to be truly disruptive, not all the hype is warranted or justified. In fact, there are many investors who have been hurt by the early hype-driven public markets,” said Sa’ad Shah, managing partner of Noetic Fund.

Burkitbayeva, Shah, and Schlidt are three of the five investors we interviewed for this deep dive. Each of them has an investment thesis that strongly overlaps with applications of psychedelics.

Indeed, investor interest around psychedelic startups has mushroomed in recent years, attracting interest from generalist investors. But as public market sentiment fluctuates, specialized VCs seem more likely to stick around for the whole trip.

Ready for the trip? Meet our interviewees:

• Tim Schlidt, co-founder and partner, Palo Santo
• Ryan Zurrer, founder, Vine Ventures
• Dina Burkitbayeva, founder, PsyMed Ventures
• Clara Burtenshaw, partner, Neo Kuma Ventures
• Sa’ad Shah, managing partner, Noetic Fund

Tim Schlidt, co-founder and partner, Palo Santo

Which applications of psychedelics are you most excited about, both in mental health and outside of it?

Outside of depression, anxiety and PTSD (the standard mood disorders we see targeted by psychedelics), the application of psychedelics for OCD is quite compelling. Based on work out of Yale, there appears to be little to no psychotherapy needed, as severe manifestations of OCD appear to be more like a motor disorder than one with a psychological underpinning.

Additionally, psychedelics therapies for a range of substance use disorders are showing great promise. In particular, there has been compelling data around psilocybin for smoking cessation and even alcohol…