The Burgeoning Psychedelics Industry Is Full of Money and Good Intentions. But Can It Avoid All Of Cannabis's Mistakes? There's a tipping point for every new industry. Psychedelics professionals are moving slowly, with caution, to be sure they tip in the right direction.

Rachel Aidan grew up between Nebraska, Texas, and New England, one of four children born to religious extremist parents. By the time she was five years old, two of her siblings had died. She had been exposed to group ritual sexual abuse that continued until her early 20s. She was raped at 15, followed by abortions, and tried to kill herself twice. She found herself pregnant again at 19. That's when it all changed. "I call my oldest daughter 'the angel baby,' because it was the reason that I looked up and said, you know, my life matters," she says.

Aidan would eventually be diagnosed with PTSD. She would go on to become a serial entrepreneur in the health and beauty space, and was for the most part getting by, but eventually hit a wall with traditional therapy. She began experimenting with psychedelics, starting with an African shrub and ceremonial hallucinogen called iboga, which she says helped her break patterns she'd been unable to break on her own. Then she explored more. In her early 40s, she used Google to find out who was offering these experiences legally and learned about The Synthesis Institute, a Netherlands- and Oregon-based startup offering guided retreats and practitioner training in psychedelic medicine. She was on a plane the next week, started working for the company a month later, and is now its CEO.

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She starts investor meetings with an abridged version of this story, by way of saying: She is not your typical CEO, but she is the typical Synthesis client. She is also a typical leader in this burgeoning psychedelic therapy industry — which is to say, she entered it for a deeply personal reason and wants to think very differently about what it means to build a business in the space.

That's the part that gives some investors pause.

There's a lot of buzz around psychedelic medicine, ever since early research has confirmed what indigenous peoples and counterculturists have long known: Certain psychedelic substances — some of which are derived from plants, and some of which are created in a laboratory — can offer real and possibly even long-lasting healing for patients suffering from depression, PTSD, and other psychological disorders. A 2021 study published in the New England Journal of Medicine reported positively on the use of psilocybin in treating patients with depression; another in the journal Nature Medicine found that, when paired with counseling, MDMA (commonly known as Molly) was highly effective in treating patients with severe PTSD.

This has prompted a shift in both the regulatory and business environment. Some states have legalized the use of psychedelics for mental health care. Entrepreneurs have begun to build companies that offer guided care, synthetic drug development, practitioner training, or other related services. Already, some estimates put the projected worth of the psychedelic drug market at $10.75 billion by 2027, fueled by post-cannabis investors eager to get in on the next big medical field. And of course, psychedelics are often compared to cannabis: That was the last drug to undergo a regulatory reconsideration, sparking an entirely new industry.

But psychedelics entrepreneurs also see cannabis as a cautionary tale. Like Aidan, the earliest cannabis entrepreneurs often had an earnest and personal connection to the product, and they saw their work as a mission. Then, many of them got trampled. "A lot of the early idealism of cannabis gave way to a race to be the biggest and fastest," says Bryan Passman, the cofounder of Boulder, Colorado-based Hunter + Esquire, an executive search and advisory firm specializing in the cannabis and psychedelics sectors. This was the "green rush" — a wave of top-dollar investors seeking fast returns, get-rich-quick founders with subpar products, and big-money brands that muscled their way onto shelves. As a result, the industry became more difficult and less accessible to the average, mission-oriented founder.

"For better or worse, the psychedelics industry is not about capitalizing everything in the same way, at least so far," Passman says. Instead, he says, early psychedelics entrepreneurs are often wondering: Can we protect ourselves from that?

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Aidan thinks about that a lot. It led her to explore new ways to structure Synthesis — to lock in its mission, so that it could never preference profits over purpose — and she ultimately adopted a self-governance business model concept called steward ownership. With steward ownership, most of the company's control stays in the hands of people who are actively engaged in or very closely connected to its mission. The "stewards" control a majority of seats on the board and the company can never be sold or taken public. Profits are either reinvested in the business, used to repay capital, shared with stakeholders, or donated to charity. Founders and investors get a return, but in a healthy and sustainable way that doesn't compromise the long-term development of the company — and the stewards are the ones who define those terms.

"Group healing with plant medicines has been a core part of various indigenous traditions for centuries," says Aidan. "Like one of my elders says, fire belongs to no one. These plants don't belong to any of us. So I went in asking the question, is there an actual corporate structure in which no individual human owns the company? What would that look like, how would that work — would it work?"

And here's an even bigger question: Will it make a difference?

If you set aside the part about controlled substances, what we're really talking about here is wide-open commercial space. These are the early days of a brand-new industry, which, no matter whether it's psychedelics or Web3, will often begin with true believers. That has upsides and downsides.

"The challenge to launching in a new space is you might have some strong feelings about how things should be," says Rory McDonald, Ph.D., an associate professor of business administration at Harvard Business School. "But in a new space, that 'should' can quickly change: All it takes is one person or organization to do things differently and have success, and it can redefine the terms for everyone else."

For example, many psychedelics founders are discussing how — and how much — to include indigenous people in the work. These communities originally developed the plant-based medicines and their methods of use, which influenced the way that synthetic varieties are viewed and used as modes of healing — and they may not benefit from the drugs' commercialization. Some startups are trying to address that problem with specific inclusion programs. For example, the psychedelic drug development company Journey Colab, which is working to develop an FDA-approved synthetic form of a psychedelic hallucinogen called mescaline, has put 10% of the company's founding equity in a trust. That was done to, in the company's words, "share success with community stakeholders, including Indigenous communities, to increase equitable access to care and recruit employees and partnerships." It's also dedicated approximately 15% of its founding equity to an employee option pool.

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But as McDonald says, nothing is forever — especially in the early stages of an industry. Journey Colab founder Jeeshan Chowdhury is very aware of that. He thinks often of what happened in the cannabis industry; the earliest entrants there spoke about righting the wrongs of the criminal justice system, which had disproportionately punished minority communities for drug possession. But today? "Two percent of the cannabis industry is owned by brown and Black people," he says. "That's in a world where thousands of brown and Black people are still in jail for a small amount of possession. We're trying to flip the script on this and that means we move with intention."

Chowdhury could easily be classified as a true believer in his field. He started medical school at 19, was a Rhodes Scholar at 23, spent years as a successful tech entrepreneur, but also struggled with his mental health and cycled through different antidepressants, therapists, coaches, and workshops. In San Francisco, he met a psychedelic therapist who had spent time learning from indigenous communities. "Psychedelics allowed me to go from barely keeping my head above water to thriving," he says. "I started asking, why don't all people have access to this?"

That's why he feels so passionate — not just about building his company, but about doing it responsibly. Laudable as that may be, McDonald of Harvard Business School warns that it may also be limiting. "For one, there's a fundamental tension between investing in the success of a new venture and that of a new industry," he says. "What's good for the industry may not be good for that organization or founder and vice versa."

For example, what if Journey Colab's mission-oriented structure slows down its growth, while a more profit-driven competitor moves faster and therefore sets another standard for others to follow? After all, entrepreneurship isn't exactly a joint project requiring collective effort, and not everyone will have the same goals — or, in the case of psychedelics, the same reverence for tradition.

Also, McDonald says, every startup must pivot around unexpected obstacles. But once they've adopted something like a steward ownership model, or created other structures that might turn off traditional investors, there's not a lot of going back. McDonald says that may turn out to be a difficult lesson. "If there weren't drawbacks to some of these alternative models, then everyone would probably be doing it that way." Perhaps for this reason, not all psychedelics startups have gone so far as to change their corporate structures. One example is Fluence, a company that provides continuing education and certification programs in the psychedelic therapy space. It established a separate fund, in partnership with a nonprofit called Access Mindfulness, to provide scholarships to people from diverse backgrounds who can advance the field — therefore serving a larger mission in a more traditional way.

But despite the variable risks and uncertainties, companies like Synthesis and Journey Colab see an opportunity: If they can build businesses that are mission-oriented, and prove that the model leads to success, they just might set the standard for others to follow.

A few short years ago, the psychedelics industry was nothing more than some progressive investors supporting a few academics doing research. Serious investor interest began in 2020, the year Oregon became the first state in the U.S. to legalize the use of psilocybin in therapeutic settings. Denver, Washington, D.C., and parts of California have also decriminalized the drug. Ketamine is now legal and widely available in clinics across the country. Yale, UC Berkeley, and Mount Sinai Hospital have all established psychedelic research divisions, and ongoing studies and trials are looking at whether psychedelics can be effective in treating autism, anorexia, opioid addiction, and severe anxiety. So far, the results have been promising.

As a result of all this, entrepreneurs are lining up. More than 50 psychedelics companies have gone public, collectively valued at more than $2 billion, and dozens more startups are working on everything from plant cultivation and synthetic drug development to establishing treatment centers and retreats, training practitioners, and IP watchdogging — that last one to monitor what constitutes true innovation versus exclusionary patents designed to shut others out. "You can't patent listening to soft music while holding hands or having 'friendly, fun experiences,'" says Passman, the search and advisory cofounder. That doesn't mean no one's tried.

Some of the bigger players include the research and advocacy group Multidisciplinary Association for Psychedelic Studies, which has raised $44 million in the past two years, and the healthcare company Compass Pathways, which is developing and testing psilocybin therapies to treat depression, creating programs to support therapist training and certification, and became the first psychedelics company to go public on a major U.S. exchange in 2020. Other notable startups include biotech company Mindstate Design Labs, which recently raised $11.5 million in seed funding to use AI to precision-design and develop MDMA-based drugs, and Grow Medicine, founded by psychedelics podcaster Laura Dawn, a digital project of the Indigenous Medicine Conservation Fund that has received funding from Dr. Bronner's and the RiverStyx Foundation.

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That may sound like a lot of players, and a lot of dollars, ready to stampede toward the greatest profits — but Passman says he sees some special nuances here. "It's very early days, but I do think the psychedelics industry as a whole is better set up for success simply because there are more regulatory and legal pathways, and more Ph.D.s and MDs, than in cannabis," says Passman. "Companies are finding themselves in bed with investors with more scientific minds, versus capitalist minds. The scientific minds are users and I believe it makes them more conscientious, which will hopefully feed into the opportunity for psychedelics to be different."

Still, he warns, if psychedelics companies want to avoid what happened to early cannabis companies, there are plenty of pitfalls ahead. "Cannabis proved that first-to-market isn't always the best," he says. In fact, some of the earliest entrants were unsophisticated entrepreneurs whose businesses quickly collapsed, helping to give the industry a bad reputation. "I think those psychedelic companies that are later to market may come with more quality, though, and calculation can and will win," says Passman.

That, of course, could bode well for companies like Synthesis and Journey Colab — because even though they're early in the industry, they're moving slowly. That's what their steward ownership model is all about.

Synthesis began life as a regular, capitalistic company. It even raised money from investors and was in talks with more of them. But then, in 2021, the team decided to embrace steward ownership, and an impact advisory firm called Purpose Economy helped it make the transition.

The first step: Aidan, the CEO, needed to convince her existing investors to stay on board, and to not scare away new ones. After all, she was now presenting a very different opportunity: Under a steward ownership model, Synthesis would never have a traditional exit.

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She created an investor deck that explained the concept of steward ownership, why it was desirable, and how it would impact investors' dollars. She outlined the stewardship board makeup, one that consisted of shareholders, employees, contractors, people in the supply chain, and indigenous community members. She also addressed investors' most common concerns. "They were worried about us having skin in the game," she says. "If we, as founders, were no longer incentivized, how would our redemptions fall in line with their redemptions? Who would get paid out first?"

She created a deck that explained how investors would get a return (by eventually being bought out), but also appealed to what Aidan calls "their spiritual ego" — in other words, offering investors a chance to support a bigger mission. She stressed that steward-owned companies act in the interests of a broader range of stakeholders, including employees, consumers, and society, and she highlighted some notable success stories: the food brand Organic Valley and German electronics company Bosch.

Some investors pulled out, but most stayed. Aidan eventually landed on her ideal mix of committed investors, and in late 2021 Synthesis became the first company in the psychedelic space to raise its Series A funding — $7.25 million — on stewardship.

Now the truly hard work begins. Companies like Synthesis and Journey Colab must not only grow and thrive, but inspire others to follow. Both point to early reasons to be optimistic. At Journey Colab, for example, Chowdhury says his company's structure gives him a recruiting advantage. Because psychedelics are still so niche and under-studied, there are a limited number of experienced researchers and partners out there — and they, too, feel a reverence for the drugs and want to treat them responsibly. "When you're able to do it in a way that aligns to people's values, particularly in 2022, that's a huge differentiator," Chowdhury says.

By way of example, he cites Dr. Kelly Clark, past president of the American Society of Addiction Medicine, as an illustration of the level of talent he's been able to attract. "Dr. Clark is working with us from a very conservative place, because we're not, you know, shipping ketamine into people's homes," he says. "We're working with scientific rigor with clinical safety and efficacy in mind. And that all comes from how we're structured and who we are."

The psychedelics industry is preparing for big news. By 2023, many experts expect the FDA to approve another psychoactive compound, MDMA, for use in psychiatric settings. Psilocybin is expected a year or two after that. Each will surely send a wave of excitement through the industry, leading to potentially more state legalizations, more entrepreneurs with big ideas, and more investment dollars available.

But for now, that news can feel very different depending on which community you come from. Passman saw it recently at a psychedelics conference, where, he says, "there wasn't a single panel where someone from an indigenous tribe didn't stand up to say their lands and medicines are being stolen, bastardized, and corporatized."

Will the psychedelics companies of the future care about this? Only time will tell. But for her part, Aidan, of Synthesis, believes that time is of the essence — not to rush her company's growth, but rather to set the example before others come along.

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It's why, last summer, she began setting up Synthesis's 124-acre Oregon retreat center. She can't legally do anything on this land right now, but she's expecting the state to eventually pass legislation that will legalize the creation of psilocybin centers. At that point, she plans to host five-day retreats at her center, in which participants will undergo professionally-led psilocybin treatment, workshops, meditation, and other programs meant to support and enhance the psychedelic experience. She expects the retreats to average around $6,500, with scholarships available. In the meantime, she's creating a curriculum, planning to train practitioners, getting to know the community, and expanding her network of elders. She spends a lot of time on that last part, convincing elders that steward ownership is a real model she intends to stick to, and that Synthesis is a company that means what it says. The center itself was bought through the stewardship model, so there is an intention to eventually return the land to the community.

"There aren't many corporations trying to reach out and say, 'Hey, can you come and sit and design how we're going to govern our entire organization?'" she says. "So there's a lot of skepticism. But as I get to meet them and they hear about my personal backstory and why I'm here, they usually understand the authenticity."

This is slow work. She admits that Synthesis is moving at a snail's pace, even as the industry rapidly hurtles toward the mainstream. But she's okay with that. If psychedelics are going to be as big as everyone thinks, there's no real rush. Instead, she says, she's using the time to listen — which she may have been less equipped to do if she had a more traditional business model.

"The pain of being a pioneer is that you're so far front, there's absolutely no help to figure it out," she says. "There's no other company like ours to point to."