The lawyer who started the UK’s first dedicated psychedelics venture fund lays out how she placed her initial bets DR. CATHERINE SCHUSTER-BRUCE DECEMBER 17, 2020 Magic mushrooms psychedelic psilocybin Psilocybin mushrooms Anitram/Shutterstock This story is available exclusively to Business Insider subscribers. Become an Insider and start reading now. Neo Kuma Ventures is a new venture fund in London that’s just for investing in psychedelics. Psychedelics are mind-altering substances, like the psilocybin found in magic mushrooms. Early research suggests that psychedelics could be used to treat health conditions, like mental illnesses resistant to conventional treatments. The mental health market is set to cost the world $16 trillion by 2030 according to a Lancet Commission expert report. Psychedelics is an emerging industry worldwide, separate to cannabis. Canada, the US and Europe are frontrunners. Neo Kuma’s 35-year-old co-founder shared her strategy for an emerging and risky field. Visit Business Insider’s homepage for more stories. Clara Burtenshaw had a personal interest in psychedelics that’s now become her job. The 35-year-old lawyer has just started a venture fund in the UK, devoted to investing in psychedelics.
Psychedelics are mind-altering substances that have been used by Silicon Valley celebrities like Tim Ferris to enhance performance and creativity. They’ve also shown promise in treating medical conditions like mental illness resistant to conventional treatments.
It’s a fast-growing industry, mostly trying to tap into the mental health market, set to cost the global economy $16 trillion by 2030 because mental health illnesses are on the rise in every country worldwide, according to The Lancet Commission, an expert report published in 2018. Included in the figure is the direct cost of mental health treatments and care, as well as indirect costs such as reduced productivity, co-lead author Vikram Patel told Reuters.
Burtenshaw’s fund is called Neo Kuma Ventures, and it only plans to invest in companies that use psychedelics for health purposes. It’s an open-ended fund, meaning there’s no cap to the amount it can invest. Burtenshaw said the fund plans to invest more than £10 million ($13.5 million) in seed to Series C deals in early 2021.
“The momentum that has been gathering in this area over the past four or five years in the US and here in the UK has been hard to ignore,” Burtenshaw told Business Insider.
Burtenshaw said she’s excited to tackle the growing mental health crisis.
“It feels amazing to be contributing towards the development of something that could be a new industry, beneficial to the UK in business terms, but also moving the standard of healthcare forward,” she said.
Psilocybin found in magic mushrooms is a type of psychedelic Alexander_Volkov/Getty Images There are other funds that include psychedelics companies in their portfolios. For instance, Leafy Tunnel is a UK venture firm investing in seed and Series A rounds in Europe-based psychedelic companies, as well as in cannabis.
US funds tend to be private backers or bigger investments firms that have made a huge investment in one company.
The top three global venture deals in psychedelics in 2020, according to PitchBook, were ATAI Life Sciences, COMPASS Pathways and Mindmed, which raised $125 million, $73.9 million and $24.2 million respectively.
Read more: See the top 17 investment firms making deals in the booming cannabis industry
Neo Kuma is borne out of Burtenshaw’s frustration with trying to find quality psychedelic companies to invest in during years of personal research.
She co-founded Neo Kuma in 2019 with Sean McLintock, a 30-year old entrepreneur with a CBD drinks company, who she was introduced to by her husband, also a healthcare investor.
Neo Kuma co-founder Sean McLintock has a CBD drinks company Neo Kuma Nick David is their partner, and responsible for investor relations. David has consulted companies in the tech, wellness and cannabis sectors. Their chairman also has experience investing in the cannabis industry.
An overlap between the cannabis and psychedelics industries is that both involve substances that are illegal in many countries worldwide, and there are regulatory processes to navigate.
“[We] each bring a different skillset to the table that is complimentary in order to be able to research and do the due-diligence to find the most exciting companies in this space,” said Burtenshaw.
David Nutt, the Edmond J. Safra Professor of Neuropsychopharmacology and director of the Neuropsychopharmacology Unit in the Division of Brain Sciences at Imperial College London, told Business Insider that more money should lead to more clinical trials, which could accelerate getting psychedelics on the market sooner.
Nutt is currently writing up the first trial that puts a psychedelic drug psilocybin — the substance found in magic mushrooms — head to head against a standard antidepressant. He’s also setting up trials looking at the role of psilocybin in treating anorexia, obsessive compulsive disorder — commonly referred to as OCD — and chronic pain syndromes. He said that trials are planned to investigate psilocybin for addiction in the future.
Burtenshaw said that the local talent is one advantage of the fund’s UK location.
Read more: The legal cannabis industry could skyrocket to $100 billion in the US alone in a decade
More than maximizing profits The challenge of investing in a nascent industry is working out whether a company could be a breakthrough, if well-funded and supported.
Amanda Feilding, a pioneer in psychedelic research, has initiated and collaborated on many of the research studies that have demonstrated the potential of psychedelic medicines — mainly through her work with The Beckley Foundation, a UK-based think-tank and UN-accredited non-governmental organization that Feilding set up in 1998. For example, she was involved in the very early research published in The Lancet that investigated using psilocybin to help people with treatment-resistant depression.
Feilding told Business Insider that it is absolutely essential that investors in this space care about more than just maximizing profits, and take seriously the responsibility to identify and support ethical and evidence-based businesses, whose leadership teams have high integrity.
Investing strategy Burtenshaw laid out for Business Insider the three things Neo Kuma looks for when investing in companies.
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The Team The team has to come from a pharmaceutical background, or someone on the team has to have experience taking a new drug through the three stages of clinical trials, and to an exit.
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The Problem There has to be a problem that the company is trying to solve — a therapeutic indication — like treating a mental health condition.
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The Science Neo Kuma has to be excited about the science, and the product that could evolve from it.
Where Neo Kuma has already invested Burtenshaw and McLintock have already made some initial investments, putting money into ATAI Life Sciences, Bright Minds and Beckley Psytech.
ATAI Life Sciences is a German biotech company developing psychedelic and non-psychedelic treatments for mental health conditions. It closed a $125 million Series C funding round in November 2020, and is expected to IPO next year. Neo Kuma has invested around £500,000 ($680,000) across multiple funding rounds, according to Burtenshaw.
ATAI is an investor in COMPASS, a UK-based company that’s conducting psilocybin trials and listed on the Nasdaq in September 2020.
Bright Minds is a Canadian biotech company that aims to create new psychedelics to treat mental health conditions by modifying natural psychedelics to optimize the drug’s effects. Burtenshaw is also hopeful about Bright Mind’s work to use psychedelics to treat conditions like cluster headaches, which are seriously debilitating headaches that affect roughly 2 people in every 1,000.
“This could become a widely taken drug, and when it comes to an exit it would be a sensible investment for a large pharmaceutical company, because they aren’t innovating or investing in the research these days,” said Burtenshaw.
Beckley Psytech is a psychedelic medicines company co-founded by Feilding. It raised a £3 million ($4 million) Series A in June, and is using the cash to research the use of synthetic 5-MeO-DMT — a psychedelic agent with a uniquely short duration of action — in the treatment of neuropsychiatric diseases. Natural DMT is found in Ayahuasca.
Three to five years until results Despite Burtenshaw’s optimism, in many parts of the world, most psychedelics are not legal unless a company or researcher is in possession of a controlled drugs license granted by the national regulator. In the UK, psilocybin is classed by the UK Home Office as “Schedule 1”, meaning it’s deemed to have no medical value.
This means Burtenshaw expects it could be three to five years before Neo Kuma see the results on their investments coming through.
Burtenshaw is confident, however, that there will be a “domino effect”, with Denmark reviewing its legislation, and the US Food and Drug Administration fast-tracking COMPASS’s psilocybin-based treatment for depression in 2018.
For now, the fund’s focus is to grow its offering.
“The next step for us is how do we meet the founders? How do we understand the industry better? And how do we get into the heart science?” said Burtenshaw.
Originally published on businessinsider.com
