Drug development is very costly, and start-ups are having a harder time raising cash. Does this make psychedelics startups that aren\u2019t developing any drugs more attractive to investors than those involved in drug development?<\/b><\/p>\n

Business models that can generate revenues with low burn rates have always been more attractive to the traditional investor than non-revenue generating businesses like drug development. However, there are investors who still understand the unique risk-reward profile in each case, and hence, founders need to be able to approach the right investor.<\/p>\n

There are drug development companies that continue to raise capital at higher valuations due to the continued validation of efficacy and the \u201coptionality\u201d that exists in their program \u2014 i.e. they are pursuing several promising leads\/molecular pathways. What is riskier, especially at this point in time, are pure drug discovery companies that don\u2019t have any leads to take into trials anytime soon.<\/p>\n

Whether developing a drug or not, a company would be attractive to investors if and only if it is addressing a key problem in the market that cannot already be solved by incumbents efficiently. Several non-drug development companies touting to be \u201cspecific to the psychedelic industry\u201d would only be successful in the long term if they have a unique and differentiating value proposition, can develop a sustained economic moat, have a proven track record of raising capital, and have the right team to execute.<\/p>\n