Clara Burtenshaw and Sean McLintock of Neo Kuma Ventures joined the GCI Content Hub in conversation about investing in psychedelics.
Could you give our readers an overview of your professional backgrounds, and what led you to psychedelics?
Clara: I started my career at a Magic Circle law firm with a focus on corporate finance. After five years I moved across to private equity specialising in acquiring and scaling retailers, as well as launching them from scratch overseas. I loved the dynamics of high-growth operations, but the retail landscape was changing and I wanted to work in something more mission-driven. I had been looking at mental health and reading a lot about the science of psychedelics, and what would be required to translate promising research into medicines that could be used in conjunction with therapy.
It was clear that private capital would be required for this, and that in order to diligence the many entrants in this emerging space, excellent scientific advisors would be required to enable us to back the companies with the science, credentials and vision to help people the most. I started assembling this. Everything fell into place when I met Sean – we wrote a thesis covering the entire treatment arc with the mission of moving the standard of patient care forwards.
Sean: I began my working life developing entrepreneurship incubators in emerging economies and later moved to a high-growth tech startup called Andela, working closely with the executive team to fundraise and scale across five new countries. After a few years, I moved to a family office where I invested in emerging asset classes and focussed on wealth management.
My personal experience of watching a family member suffer with addiction and find healing in psychedelic assisted therapy made me want to look at how access to such treatments could be rolled out at scale to help others. I began a journey exploring the clinical application of psychedelics and whether such a profound change could be replicated in a clinical setting. It is a fast-moving sector and I have not looked back since.
As the industry continues to grow at breakneck speed, what sectors appeal to you most in terms of deploying investment, and why?
We see a huge need for precision medicine in mental healthcare. This includes better diagnostics, patient stratification tools, and the development of biomarkers to better predict if and how a patient might respond to a certain medicine.
Another core focus is care delivery, particularly improving patient outcomes through optimising set (the mindset of the patient throughout treatment) and setting (the environment in which treatment is delivered). We believe this is critical. There are many ways in which companies are exploring this, for example, platforms and applications including biomarker driven personalised music; virtual reality that can be used in intention setting, preparation and integration; and with patient engagement and monitoring platforms.
We are also looking deeply at how we can create wider access through more localised and affordable care, led by a patient-first approach and robust risk mitigation strategies.
What are the core steps you take when analysing investment opportunities within the psychedelics space? Typically, what kind of timeframe will the process take, end-to-end?
The investment process varies depending on the type of company, the stage it is at, and how quickly we have to move! In a fast-moving market you have to be reactive but drug development is high-risk with a number of technical and clinical challenges – data needs to be reviewed. If the opportunity is of interest we have found that it is only by going through the materials properly and jumping on scientist to scientist calls that you can see whether the team has the experience to lead a complicated clinical process.
Depending on how advanced the company is, we will spend quite some time looking at the target product profile and clinical trial design, as well as data readouts to date. We also need to see a GTM and pricing strategy that makes sense and which considers the various stakeholders in the process.
When analysing platforms and tools we look at the usual SaaS metrics and we test the products. With clinics we’re looking for high quality patient care, a team that understands the healthcare industry, and the business model and roll out strategy. The entire process could take 2 weeks or a few months, depending on the opportunity and the diligence required.
Who are the key stakeholders that have significant input within your decision-making process, and why? How important do you believe it is to garner a rounded view of an investment opportunity before you commit funds to an organisation?
As well as a number of sector experts who act as regular advisors through the diligence process, Neo Kuma has a wide network which we draw upon where particular expertise is required, for example healthcare professionals to understand the practicality of a niche product or service, data scientists where machine learning is applied etc. and as is typical with life sciences we also require IP analysis, legal analysis and work with experienced advisors here.
We take as rounded a view of an opportunity as warranted by the stage of the business, but with pre-seed investments sometimes you have to back the founder and take a leap of faith! In addition to this we have fantastic strategic advisors and an FCA regulated fund manager who are involved in the investment committee process.
For an industry so heavily predicated on complex science, what are the key characteristics you look for in a company’s leadership team and strategic aims?
We look for a strong team with relevant industry experience, novel intellectual property, a large addressable market, and a robust strategy to achieve target end points. We appreciate founders who have managed to secure non-dilutive funding or partnerships that allow for a more efficient use of resources. Strategically, a company should have a clear understanding of their funding needs, inflection points, and go to market strategy. It is critically important to map the company’s timeline and understand its future needs.
Where do you believe is the greatest area of need for innovation within the industry? Conversely, what sectors of the space do you think are perhaps already overly saturated, and why?
This is an industry saturated with companies exploring generic drug approaches, whether companies growing and extracting mushrooms, or trying to synthesise what is available in nature. This was to be expected from early entrants mining opportunities based on literature available at the time, but it has also led to a flood of undifferentiated patents and a raft of companies racing to clinic and expensive clinical trials.
We prefer to focus on the development of novel chemical entities originating from psychedelics that have been optimised to improve safety or to increase characteristics that provide a more targeted approach to treating a particular indication. There are many psilocybin analogues seeking to do this and we believe there will be excellent fast followers that will build on the data from those clinical readouts, but we’re also keen to see similar innovation with the other classic psychedelics.
Beyond this, there are also a number of companies focussed on retreats in exotic locations. While we do not invest in retreats, this rush of new entrants has been obvious and we stress the need for excellent training providers and tools to ensure patients are safeguarded through the process. We are excited to work with companies innovating in this area.
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