INN spent some time with one of the leaders of a new investment fund dedicated to the psychedelics opportunity.
As the psychedelics investment community begins to come into focus, one association is working to create an all-around hub for investors looking to enter the space.
The Conscious Fund is a relatively new group in the investment arena, and it’s looking to devote its time and money to the growing psychedelics industry.
In an exclusive interview with the Investing News Network (INN), Michael Hoyos, co-founding partner, Americas, with the Conscious Fund, talked about the team’s goals moving forward and just how potent investing in psychedelics can be.
The fund was set up by venture capital investors Henri Saint-Cassia and Richard Skaife alongside Hoyos late in 2019. It is based out of Malta, where it received regulatory approval earlier this year, just before the world went into lockdown due to the spread of COVID-19.
The goal of the investment fund, Hoyos told INN, is to have 15 holdings totaling over US$10 million in seed-stage capital by the end of the year.
In his opinion, the psychedelics investment market is currently split into four main categories:
- Pharmaceutical/biotech startups: Companies looking to develop new drugs based on psychedelic compounds created in a lab to aid in the treatment of mental illnesses.
- Clinics: Treatment programs for patients made available via legally available psychedelics like ketamine.
- Ancillary industries supporting psychedelics: Medical devices, digital therapeutics tools, media companies and more.
- Psychedelics-touching operations: In this case, novelty retreats offering the use of psychedelics as part of a larger experience.
Leaders hope to build more than just an investment fund
At the onset of any new investment opportunity, there are likely to be people who want to establish themselves as bonafide experts who other investors and observers can look up to for guidance. The psychedelics space is no different in this regard.
While contending with the nebulous legal framework surrounding psychedelic drug candidates and substances, investors also have to perform traditional top-down business due diligence on the ever-increasing number of companies vying for attention and dollars.
That’s where the Conscious Fund hopes to come in. Hoyos told INN that the “grand vision” for him and his colleagues is to go beyond the investment fund and to establish an all-around platform.
As the co-founders manage their investment vehicle, they’ve also set a goal of creating an environment for those interested in the psychedelics space to come together and learn.
Alongside an informational blog dedicated to psychedelics knowledge, the Conscious Fund has also created Microdose Psychedelic Insights, a psychedelics group that hosts regular events online for those interested in learning more about the space.
Adding a psychedelics-related job board to its website is another way the Conscious Fund is aiming to set itself up as a hub for those within the industry, or looking to jump aboard.
Desire to offer education comes from fear of “cannabification” of psychedelics
When chatting with Hoyos, it became clear that he and his colleagues want to try to help the psychedelics industry as much as they can. He repeatedly said the group wants to share knowledge and connections among those interested, even if the fund doesn’t directly benefit.
This drive to steer the conversation with experts and industry insiders appears to be at the core of the work done by the group and its events. And overall there’s a specific reason the three investors are taking this approach.
“What happened with cannabis is you had had this green rush,” said Hoyos. “An evolving regulatory landscape in certain jurisdictions that led to a massive influx of people wanting to get involved with the space, but largely they mostly just saw it as a way to make a quick buck.”
The investor said cannabis is an example of a market rush with people chasing “wild valuations” based on substantial projections. Hoyos told INN that the phrase “cannabification” was coined by his business partner Saint-Cassia.
He believes the rush of capital into cannabis served to balloon the industry, and the recipients did not act as “good stewards” for capital.
Hoyos didn’t pull any punches when breaking down his view on the rush for cannabis investments. In his eyes, the onslaught was not defined by proper valuations and instead prices were being defined by “hopes and dreams.”
While the two industries are often joined in conversation, experts have emphasized that psychedelics investments are poised to operate at an entirely different speed than cannabis.
What’s at the core of the psychedelics investment opportunity?
The most promising psychedelics investments right now operate in the drug development market, a segment notorious for being capital intensive and taking years for completion. But Hoyos said investors should be encouraged about the upcoming results in the space.
The investor told INN that a wave of approvals will likely arrive later in the decade as multiple research trials are being launched this year. However, some of the most advanced trials are set to see results in the next 18 months, according to Hoyos.
“For investing in the space, I think the full value will be realized in the longer term, but there will be opportunities for exit liquidity events a lot sooner,” he added.
The costly proposal of researching and creating a drug that meets the standards of the US Food and Drug Administration (FDA) may take more effort and capital than what the current batch of psychedelic participants can manage, so in the longer term there may be acquisition plays.
“I would say probably for investors getting in now, many of them likely won’t have to go through the full FDA approval process to realize in order to monetize their investment,” he said.
Ethical investment at the core of the Conscious Fund
As part of their involvement in the psychedelics industry, the leaders of the Conscious Fund set up a list of pledges that will rule future returns and gains in psychedelics investing.
This list of promises includes a mandate to give back two separate 5 percent returns. One will be set up for “advancing causes that advance humanity’s collective consciousness,” with a general guidance to support indigenous communities around the world.
Hoyos told INN part of this cause relates to initiatives set up by Dennis McKenna, who is a member of the fund’s advisory board, and founder of the McKenna Academy of Natural Philosophy.
“With the help of our ethics advisor, we plan to help create programming and initiatives at the academy that support the work of indigenous communities,” Hoyos told INN in an email.
The other 5 percent will go back to the fund’s portfolio companies. “We want to go beyond the traditional kind of venture capital model,” Hoyos said.
The psychedelics industry and the capital markets are beginning to form the bonds of what may be a long-lasting and meaningful relationship, and while it may be easy to think of the influx of capital as a way for an alternative drug scene to become a new corporate standard, Hoyos told INN he believes many legitimately want to help the industry grow.
“I think the interesting thing about these substances is that beyond the obvious therapeutic and medical applications that we’re seeing, I think on a personal level they have this kind of tremendous capacity to (create) personal development and empathy,” Hoyos said.
“I think that’s helped a lot of folks that I’ve spoken to feel almost like a certain responsibility to help this industry flourish and develop in the right way,” he said.
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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: Numinus Wellness is a client of the Investing News Network. This article is not paid-for content.
The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.