In 2017, Mike Arnold saw an opportunity so big that it changed the course of his life. After representing several black-market cannabis farmers as a criminal defense attorney, he noticed popular perception of the plant was shifting. Laws were loosening, more people were partaking, and research was increasingly showing that cannabis was perhaps not that bad for you—and maybe even at times good for you. For Arnold, that meant one thing: If he got in early on the industry, he could make bank.
That year, Arnold left law and launched a cannabis startup. He raised $2 million in investments in less than four months and produced 9,000 pounds of recreational cannabis in one year. At the end of 2017, he handed the company over to a management team. He’d done what he had set out to do: caught a boom in time and lined his investors’ pockets. By the time the cannabis industry was overwhelmed with newcomers, Arnold already had his eyes trained on the horizon, looking for the next wave. And it didn’t take long for him to spot it: psychedelics.
“I realized that by 2020, this was going to be a big deal,” he says.
He was right. After spending decades as highly illegal and restricted substances, psilocybin (magic mushrooms), LSD, MDMA, DMT, and other psychedelic drugs are proving to be viable treatments for a growing slate of mental and behavioral disorders. And while that means we’re poised to see a radical shift in mental health care (not to mention human consciousness), it also means that entrepreneurs and investors like Arnold expect psychedelics to become the next cannabis: a consumer product category potentially worth billions — but only for those who stake their claim first.
Not everyone sees this opportunity for entrepreneurship as a good thing. For researchers looking into the efficacy of psychedelics for therapeutic purposes, these substances are far more than a market opportunity—they’re potentially life-saving medications. And after decades of prohibition, psychedelics are just barely gaining mainstream acceptance. One false step — a high-profile injury or death, for instance — could put psychedelics back where they started: banned and considered to have no accepted medical use. If psychedelics are sold on shelves rather than administered in tightly controlled medical settings, researchers surmise, the chance of this happening grows exponentially.
“I realized that by 2020, this was going to be a big deal.”
Arnold sees it differently. To him, the fastest way to get these substances to the people who need them most is through the free market, an industry of brands and products available to anyone and everyone. With this in mind, he launched Silo Wellness, a self-proclaimed psychedelic tech company that aims to launch various psilocybin-based devices available to the general public.
At the end of 2019, Silo announced its first product — a patent-pending nasal spray that administers a measured microdose of psilocybin. Despite no current pathway to legalization — and general consensus among researchers that it’s too soon to know if products like this are safe — Arnold says he’s already taking preorders and is moving forward with manufacturing.
With this leap of faith, Arnold is joining a new class of entrepreneurs working to solidify psychedelics as the next VC darling. But they’re also opening the door to a big question: Will branding, marketing, and packaging psychoactive substances do more harm or good?
Before psychedelics caught the eye of entrepreneurs, they intrigued scientists. After decades of prohibition, researchers resurrected the study of psychoactive substances for therapeutic purposes a few years ago, hoping to find new solutions to a mounting mental health crisis. Now, years into what has been deemed the “psychedelic renaissance,” a growing collection of studies are showing that these substances could become paramount treatments for depression, PTSD, addiction, end-of-life anxiety, and much more.
The U.S. government — which 50 years ago banned psychedelic substances — has started loosening restrictions to allow their study and use. In 2017, the Food and Drug Administration (FDA) designated MDMA a “breakthrough therapy” to treat PTSD, potentially paving the way for full approval by 2021. The FDA also approved ketamine for treatment-resistant depression in 2019 and deemed psilocybin a breakthrough therapy for major depressive disorder.
Psychedelics have been further legitimized as potential treatments for disease by the Johns Hopkins Center for Psychedelic and Consciousness Research, a first-of-its-kind facility in the United States that launched last year. The organization received $17 million in funding from private donors, largely driven by author and investor Tim Ferriss, to exclusively study the efficacy of psilocybin and other substances for a variety of disorders. The center’s establishment marked a turning point for psychedelic research — if one of the most prestigious research institutions was devoting this much to the cause, it must be worthwhile.
But, of course, the use of psychedelics has also become prevalent outside of clinical trials. Many in the tech world are vocal proponents of microdosing or full psychedelic experiences in the name of self-optimization, which has helped tip psychedelics into the mainstream.
The trajectory of cannabis looked pretty similar. After years of the plant being buried under a seedy reputation, legal restrictions began to loosen after new research showed promising medical applications. What followed was an explosion of highly branded, startup-lingo-laden cannabis companies, which pushed the once-illicit drug to the status of luxury lifestyle item. Beauty, beverage, and edible products cropped up everywhere, peppered with health claims that almost seemed beside the point.
Psychedelics are not quite there yet — and may never be. Cannabis is used chronically, making it a bigger opportunity both medicinally and recreationally than psychedelics, which are typically done only a handful of times. Cannabis also produces the nonpsychoactive compound CBD, which is being shown to have a long list of health benefits, opening the market to a wider subset of people — not just those who want to get high. Psychedelics, on the other hand, have no such derivative. As far as we currently know, their effects on mental health come from the mind-altering experience they produce. Removing that psychoactive component may not provide any benefit.
That’s not stopping Arnold and others like him from betting that psychedelics will, in fact, follow a path similar to cannabis, becoming not just drugs that can alter your mind, but potentially part of a lifestyle. This is especially the case for microdosing, which could turn out to be the exception to these rules. A microdose is a small dose of a psychedelic that can barely be felt. Used consistently, many people believe — and some studies show — that microdosing helps boost mood, creativity, and productivity and could even work as an antidepressant. This is the market Silo is tapping into.
Regardless of whether or not psychedelics are the next cannabis industry, investors are catching on to this proposition. Last year saw the formation of Field Trip Ventures, the world’s first venture fund exclusively for psychedelics. German company ATAI Life Sciences is investing in biotech companies working on psychedelic treatments for mental health. Peter Thiel has backed Compass Pathways, a startup setting itself up to become the first legal provider of psilocybin-assisted therapy, and Shark Tank host Kevin O’Leary funded the startup MindMed, which is manufacturing a drug from the psychedelic ibogaine aimed at treating addiction. Earlier this year, MindMed became the first psychedelics company to go public after raising more than $24 million in a pre-public funding round, and Compass’ IPO may be next.
“Those of us that think these could be viable medications want to see them developed and disseminated very broadly to populations that need them… As to whether this is the right time for it, that’s a different question.”
In their quest to dominate the space early, these companies are acting before the medical research is fully established and accepted—and before their products are legal to sell. Though their ultimate goal may be to sell psychedelics at stores like Whole Foods, many of these companies are running clinical trials that they hope can speed up medical demand for psychedelics and, therefore, the process of getting these substances approved for therapeutic use.
Silo Wellness is also partnering on clinical trials to research the efficacy of psilocybin, particularly for soldiers with PTSD. MindMed is organizing clinical trials for addiction treatment. Compass is organizing clinical trials it hopes will validate its plan to develop, brand, and corner the market on psilocybin-assisted therapy in Compass clinics. The startup NeonMind Bioscience is constructing a lab to research psilocybin for weight loss, obesity, diabetes, and heart disease — and then plans to tailor its products to the health claims its trials establish.
While these sound like straight-up health applications, their status as for-profit enterprises helmed by entrepreneurs with no previous experience in the psychedelic space has some worried that these treatments and substances could be exploited.
“Those of us that think these could be viable medications want to see them developed and disseminated very broadly to populations that need them. That in and of itself will involve some form of commercialization,” says Jennifer Mitchell, a psychedelic researcher at the University of San Francisco. “As to whether this is the right time for it, that’s a different question.”
Despite the recent resurgence of psychedelic research, much is still unknown about how these substances work. While research shows that psilocybin, for instance, works on the serotonin receptors in the brain, and MDMA aids the release of serotonin and dopamine, researchers in this space caution that this is not where the magic lies. Startups may be jumping the gun, trying to make medical claims for products that are poorly designed.
Many attribute the success of psychedelics to two mysterious and subjective occurrences unique to psychedelics: ego dissolution, or the complete loss of one’s sense of self, and “mystical-type experiences,” or hallucinogenic encounters with a divine or spiritual entity. In studies on the effects of psychedelics on depression, participants who experienced these states saw the strongest and longest-lasting improvements, and many count them as some of the most important and life-changing experiences of their lives. If the potency of psychedelics lies in reaching this state — and having a therapist help guide you through it — then buying products with trace amounts of a psychedelic substance off the shelf may not provide lasting benefit. Chronic use that mirrors the use of antidepressants could also prove futile if a one-time mind-opening experience is what actually helps mental health and other disorders.
On top of that, there is evidence that the situation in which a person takes psychedelics has a great impact on the outcome. Psychedelic-assisted therapy is just that — a therapy session assisted by a psychoactive compound. In the protocol set up for most clinical trials, one or two facilitators are in the room to help the patient through the psychedelic experience, and multiple subsequent therapy sessions help people process and integrate that experience. It’s in this process where researchers believe the healing lies.
What researchers worry might happen is that startups in this space will either try to remove the experiential component by removing the psychedelic compounds, or they’ll keep the experiential element but not offer patients the proper guidance to make it through and integrate that experience.
“That model is a huge departure from the medical model that involves daily dosing of medications that are designed to ameliorate symptoms,” says Keith Heinzerling, an addiction specialist at the Pacific Neuroscience Institute and director of the Pacific Treatment and Research in Psychedelics (TRIP) Program. “It’s not enough to remove these key elements and really get the benefit.”
“You know what causes consumer products and therapy to be expensive? Artificially regulating their availability.”
Startups like Compass and Nana, a psychedelic tech company that is building a “turnkey” solution for the operation of high-end psychedelic clinics around the world, are building therapeutic protocols. But researchers like Heinzerling and Mitchell worry that in order to turn a profit, these protocols might not live up to the standards needed to really deliver results — and they could be so expensive and exclusive that the people who need these interventions most might not be able to access them.
This is where entrepreneurs and researchers are divided. While Heinzerling and Mitchell believe the best and potentially most affordable way to get these treatments to the masses is through traditional medical channels, entrepreneurs like Arnold think this will only happen once these drugs are released to the free market. Outside of the regulated realm of the health care system, they argue, competition will drive prices down and treatment will be more widely available. Plus, with for-profit businesses, there’s more money to throw around.
“To say that outside of a for-profit model this becomes much more accessible is not true,” says Ekaterina Malievskaia, co-founder and head of research and development at Compass. “If there is a model where investors can get a return on their investments, [then] there is an established path to raise the hundreds of millions of dollars that are required for clinical development.”
Arnold agrees. “It’s best for the consumer to have the least amount of regulation as possible,” he says. “You know what causes consumer products and therapy to be expensive? Artificially regulating their availability.”
Looking back on this moment in time, we might see it as the tipping point between psychedelic research and psychedelic commercialization. The argument is at least partly over who — medical professionals or scrappy entrepreneurs — is best equipped to build the structures.
“They call it a psychedelic renaissance,” Arnold says. “But what is a renaissance without artists, without creators? I want to see more Michelangelos.”