A Booming Industry

The psychedelics space is booming.

Over the past few years, startups focused on turning psychedelic compounds into approved medicines have raised hundreds of millions of dollars from private investors and dozens have gone public. Research on compounds like psilocybin, the active compound found in magic mushrooms, and MDMA is resurfacing after years of neglect amid the war on drugs.

As companies get closer to receiving approval from the Food and Drug Administration to bring their psychedelic treatments to patients, they’ve also been planning out their patent strategies to carve out their share of the market.

VCs have deployed millions into psychedelics startups

Venture-capital investors have been at the center of the psychedelics boom. In early 2020, startups in the space said they were beginning to see signs that investor appetite was growing. Then, we saw a flurry of activity, which one industry exec called a “psychedelic renaissance.”

Soon, VC firms focused on psychedelics companies specifically began to emerge. Insider’s list of the top 11 venture-capital investors in the space collectively deployed $139.8 million into startups in just a few short years.

They also gave us their predictions for the coming months. Some told us that biotech giants were looking to get into the space, while others predicted a boom in tech companies and clinics that would lay the groundwork for when medications come to market. We can also expect to see new compounds and a slew of startup failures, they said.


The psychedelic drugs market is expected to gain market growth in the forecast period of 2021 to 2028. Data Bridge Market Research analyses that the market is growing with a CAGR of 13.3% in the forecast period of 2021 to 2028 and is expected to reach USD 7.58 billion by 2028 from USD 2.82 billion in 2020 and USD 4.07 billion in 2021. The rising prevalence of mental depression and anxiety and availability of off-label drugs are the major drivers which have propelled the demand of the psychedelic drugs market in the forecast period.

U.S. Government Funding

The National Institutes of Health is helping to fund a Johns Hopkins study looking at whether the psychoactive chemical could help people quit smoking.

In fall 2021, the United States federal government granted researchers funding to study the therapeutic potential of a classic psychedelic for the first time in 50 years. The National Institutes of Health granted Johns Hopkins Medicine, in collaboration with University of Alabama at Birmingham and New York University, $4 million to investigate if psilocybin — one of the primary psychoactive ingredients in psychedelic mushrooms — can help people quit smoking.

This isn’t the first time that NIH has looked at the promise of psychedelics for mental health — decades ago they funded more than 130 studies just looking at LSD. But amid the political and media frenzy surrounding psychedelics, which ultimately led to the signing of the Controlled Substances Act, NIH, in large part, stopped funding psychedelic research, too. Matthew Johnson, Ph.D., professor of psychiatry and behavioral sciences at Johns Hopkins University, and his fellow researchers received a grant which came specifically from a pool of money allocated by NIDA — the National Institute on Drug Abuse, which exists under the National Institutes of Health — for novel treatments for substance use. However, researchers wanting to study psilocybin for depression, PTSD, or any other indication for which psilocybin has also shown promise would not have been.

However, in a promising development, during a Senate budget hearing in May, former NIH director Dr. Francis Collins said NIH and the agencies that fall under it will “want to have a hard look” at the promise of psychedelic compounds for mental health.

There’s been some movement in Congress, too. In 2021, Plant Medical Coalition met with more than 100 Congressional officers and laid the groundwork for the first-ever psychedelic caucus, which would help get the funding approved in the future.

The funding is about so much more than simply securing resources to look at psychedelics for mental health. Yes, federally-funded research could help drug development companies get these treatments, in conjunction with therapy, to market. But in addition, anecdotally, and in small studies, psychedelics have also shown promise for physical conditions, from neurodegeneration to inflammation, which are also worth researching. So, many years after the pyschedelics movement began, there is hope about what a government grant signifies, not only for the movement itself, but also for aspiring researchers, who now feel like there may be a promising career and future in this exciting and potentially game-changing field.