A major psychedelics company just landed a record sum of cash from VCs. The CEO told us how he raised the mega-round and why it's a sign psychedelics are going mainstream.
- ATAI Life Sciences closed a $125 million Series C round, marking the biggest funding round to date in the psychedelics space.
- The amount tops Compass' $80 million round, which closed earlier this year before the London-based company went public on the Nasdaq.
- ATAI CEO Florian Brand told Business Insider that the company is going to allocate the funds to three main areas: ongoing clinical trials for psychedelics medications, adding more companies and therapies to 'the ATAI ecosystem,' and developing digital tools that will benefit current programs.
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Companies striving to use psychedelics as medical treatments keep enticing investors.
ATAI Life Sciences, a psychedelics company backed by Mike Novogratz's Galaxy Investment Partners and by Peter Thiel, just closed a $125 million Series C funding round, the company said on Monday. It's the largest funding round to date in the booming psychedelics space.
ATAI invests in and acquires companies looking to develop medicines for mental-health conditions from psychedelics like psilocybin, arketamine, and ibogaine. Multiple firms working with psychedelics have gone public this year, capitalizing on growing investor interest in mental health treatments in the once-taboo space.
One of those companies, Compass Pathways, is part of Atai's portfolio. It recently started trading on the Nasdaq and has a market value of around $1.2 billion.
ATAI CEO Florian Brand told Business Insider that he thinks more traditional investors are starting to make bets on the psychedelics industry, benefiting companies like his that are raising funds. He also said that the use of psychedelics is becoming more mainstream, comparing it to the growing acceptance of cannabis.
A portion of the recent funding round, $32 million, came from convertible debt, a form of financing where a startup borrows money that converts to equity at an agreed-upon date. ATAI previously raised a $43 million Series B round in March 2019.
The round announced Monday came from investors including Thiel, Galaxy, Falcon Edge Capital, Catalio Capital Management, and ATAI founder Christian Angermayer's family office Apeiron Investment Group.
Read more: The CEO of a $1.2 billion psychedelics company told us he expects psilocybin-based treatments by 2025 and predicts a 'Cambrian explosion' of innovation in the industry
ATAI declined to disclose its post-money valuation.
Compass Pathways' Series B, which closed at $80 million in April of this year, was previously the largest in the psychedelics space. Compass Pathways raised $127.5 million in its initial public offering in September.
ATAI and Compass Pathways are among the first and biggest psychedelics companies to gain traction from traditional investors. Investors in Compass Pathways' Series B included the biotech fund Perceptive Advisors and a fund linked to the pharmaceutical company Otsuka.
ATAI CEO says the company is looking to spend the money on three key areas
Brand told Business Insider his company is going to allocate the funds to three main areas.
First, the funds will be focused on ongoing clinical trials for psychedelics medications. ATAI oversees companies working with substances like psilocybin, ibogaine, and arketamine, among other psychedelics.
There will also be a focus on adding more companies and therapies to "the ATAI ecosystem," Brand said, adding that the company will launch new startups and acquire others to bring them under the ATAI umbrella in the coming months.
Last, Brand said the company will focus on developing technology like digital therapeutics tools.
"That's something that we are heavily exploring and also investing in," Brand said. "We're very excited about adding new opportunities where we see a lot of potential to make a leap forward for patients to get effective treatments."
Read more: ATAI is courting pharma and biotech investors as it looks to raise millions to turns psychedelics into approved medicines
Brand said he thinks that the COVID-19 pandemic magnified the problem of the mental health crisis, which in turn may have helped the company raise money.
"I guess we benefited maybe unlike other industries from increased attention to mental health care problems resulting from the pandemic as well as increased interest and momentum that they saw with regulators on the science side," Brand said.
Plus, voters in Oregon passed a measure legalizing the sale of psilocybin-containing mushrooms for therapeutic purposes earlier this month, and voters in Washington DC passed a measure decriminalizing the consumption of psilocybin-containing mushrooms, a further sign of the increased acceptance of the drugs.
As for whether we can expect ATAI to go public soon, Brand declined to comment but said the company will "explore all sorts of funding avenues."
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