It started as a shared interest in the science around mental health, psychedelics and a podcast featuring like-minded people, and culminated into a venture firm focused on advancing new approaches to mental health treatments.

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San Francisco-based PsyMed Ventures, founded by Dina Burkitbayeva, Greg Kubin and Matias Serebrinsky in 2020, on Friday announced its new $25 million investment fund. The money will go to early-stage startups, primarily those working on psychedelics, to help treat mental ailments. The fund will also invest in startups working on neurotechnology, digital health and precision psychology, all early, but fast-growing fields of technology in mental health.

PsyMed has already started making investments to startups, though the founders acknowledge that only about one-third of the $25 million has been officially secured. The trio expects that by the end of March, they’ll have met their fundraising goal and will ultimately help fund between 20 and 25 startups.

Among PsyMed’s early investments are biotech companies Freedom Biosciences and Delix Therapeutics, both working on using psychedelics to make new medications.

Freedom Biosciences was co-founded by Burkitbayeva and John Krystal, chair of psychiatry at Yale University. The biotech company is working on clinical-stage development of ketamine- and psychedelic-focused therapeutics.

Delix Therapeutics is developing therapeutics with non-hallucinogenic drugs known as psychoplastogens. In layman’s terms, psychoplastogens are meant to help our brains compensate for injuries and diseases, and make new links between the neurons firing signals back and forth.

The three PsyMed founders spoke to Crunchbase News this week about the fund’s inception, investment strategy and goals for the future of mental health treatments.

This interview has been lightly edited for length and clarity.

Tell me about how you came together to work on this fund.

Kubin: We decided to create a syndicate together on AngelList, which has been a really good platform for us because it has given us exposure to two different communities. One is a community of people who are therapists, medicine people, psychiatrists coming from life sciences. But then also we’ve connected with people who are more just interested in technology and startups that see the value of psychedelic medicine. We have invested in 14 companies through our syndicate with over $15.6 million. From that, I believe we have over 300 LPs that have invested with us. We really feel the syndicate has enabled us to create a community of LPs—not just capital, but people, individuals who can support the companies that we’ve been investing in.

How has fundraising gone?

Kubin: One thing that’s been really neat is some of the people who are investing in our fund have already invested in us through our syndicate. It’s people we’ve been able to build trust and rapport and connection with, and that was a nice validation. … What’s interesting is we’re finding interest from a wide array of investors. Some of these people have benefited from psychedelic medicines themselves. Others see the promise of it, or are following the space and the research. For us, it’s really important to have values-aligned investors who are investing with us because … integrity is super important to us. We recognize this is a very early industry and it’s going to take long-term, committed partners in terms of the founders we back, as well as the people who are supporting us.

Psychedelics are still federally illegal, though some states are loosening their laws on their use and the FDA can approve certain applications for them. How does that affect the industry and its investment opportunities?

Burkitbayeva: We’re very aware of the limitations that a scheduled drug such as psilocybin, or MDMA, or ketamine pose in terms of investment and coming to market. With that in mind, … we look at the medical model, not the recreational model. … We invest in companies that would be developing a drug that would go through the FDA approval process, and that’s similar to any other biotech company that’s developing a molecule in oncology or cardiology. If that process is successful, and it’s FDA approved, then that trumps any kind of DEA scheduling. … Otherwise, we believe there’s a possibility that it goes through the FDA process and there could be some descheduling. That would not affect the investment, really.

What can you tell me about your investment strategy? Why are you focusing specifically on early-stage startups?

Serebrinsky: That is where we can actually make a difference. That’s where we can help and support entrepreneurs based on our own experience building companies in the past, so that’s number one. Number two is that this is still a very nascent industry. Mental health therapies have been completely underfunded until now, so the companies are just starting as well. … We started with psychedelic medicine and we’ve developed a playbook about how to get involved in this phase, how to invest, how to think through those opportunities. We’re expanding that same playbook to other verticals as well, but based on how established we are in psychedelic medicine, more than 50 percent to 60 percent of our investments in the space will be in psychedelic medicine for the first fund we’re raising.

What emerging technologies or research in this space do you have your eye on that might be surprising to some people?

Serebrinsky: Some of the (psychedelic) therapies we are looking at start with depression and anxiety as the biggest markets, but as these medicines are researched more, they’re finding potentially interesting opportunities. Nothing is certain, but they’re looking at potential uses for substance use disorder and things more out there, like Alzheimer’s disease and Parkinson’s. There are companies working on these therapies for things like stroke and organ transplant failure … and eating disorders as well.

Burkitbayeva: I think the mental health treatments space … is going to grow, not just because COVID has had such a hard hit on mental health, … but I think because there was not enough attention, research and investment going into mental health, so we haven’t really diagnosed most of the indications (of mental illness) that are actually out there. We have depression, anxiety, PTSD, OCD, bipolar, but what we’re seeing over and over again in the most cutting-edge research is that there’s so much more granularity to each one of these.

In the future, when someone goes to a psychiatrist, there will be so many more tools, like neuroimaging tools and other types of biomarkers that we can use to diagnose, but we will also have just a larger number of indications that we’re aware of. So the size of the market is not just going to grow by the number of patients that need help, … but also by how sophisticated the diagnostics space is going to become. … I think psychedelics are probably going to be one of the major treatments, alongside neuro and digital therapeutics.

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