Psychedelics 101

10 min readMay 25, 2022


At @indigo, our interests within the psychedelic space stems from our ethos to inspire change from within. We see the potential for life-changing innovation and aim to be at the forefront of guiding the industry’s values, technology, and culture. Welcome to #Psychedelics101 — where we will delve into this interesting space piece by piece.

SECTION I: Psychedelics 101

1- Background: What are psychedelics?

Psychedelics are a class of substances that alter senses, emotions, perception, cognition, and imagery. Some common examples of psychedelics are mushrooms, ayahuasca, mescaline, and LSD.

2- Mental Health & Wellness Impact: What are the benefits of using psychedelics?

Psychedelics have proven useful in therapy for mental health issues such as depression, anxiety, addiction, OCD, and PTSD. Recently, there has been a surge in clinical research to better understand these drugs and their effects on the human psyche and biology. Here are high level benefits of the most prominent psychedelics in the industry:

+ Psilocybin +

Thought to help with substance abuse and depression. Psilocybin trips cause hyper-awareness of the space around you.

+ Ketamine +

Believed to prompt the growth of neurons in the prefrontal cortex, which could help people with psychiatric disorders caused by atrophy of the prefrontal cortex. Unlike other psychedelics, ketamine affects the learning and memory brain receptors.

+ Lysergic acid diethylamide (LSD or Acid) +

Can treat anxiety, depression, and addiction. LSD users usually experience blissful trips involving sensory, cognitive, and emotional changes.

+ Methylenedioxymethamphetamine (MDMA, Ecstasy, or Molly) +

Usually taken in pill form, this drug causes “trips” similar to LSD. MDMA increases the activity of serotonin, dopamine, and norepinephrine. Direct mental health benefits are less conclusive for MDMA than other drugs.

3- Opportunity: What is the Industry Valuation?

The combination of increased research and the ongoing legalization of psychedelics in the United States is sparking interest across the nation. Bloomberg Business states that the North American psychedelic drugs market will reach a valuation of $3.2 billion in 2026. In addition, the global psychedelic drugs market was valued at about $4 billion in 2021 compared to the $7.6 billion projection for 2026.

In a second section, we will delve into the history and the recent push for the legalization of psychedelics, answering key questions such as “What significance do psychedelics have to cultures around the world?” “How do psychedelic drug laws vary within the U.S., and around the world?”

SECTION II: The History of Psychedelics

1- Primary Types of Psychedelics

There are two primary types of psychedelics, entheogenic and synthetic. Entheogenic psychedelics come from plants. Examples include Ayahuasca, DMT, Mescaline, Ibogaine, and Psilocybin. Synthetic psychedelics are created in labs. Examples include LSD, MDMA, and Ketamine.

Many ancient cultures highly revered entheogenic psychedelics and used them for healing practices. More recently, the discovery and creation of synthetic psychedelics arose in the 1800s.

Between 1938 and 1962, LSD, psilocybin, and ketamine were all discovered and synthesized by scientists in Switzerland and the United States.

2- Historical Significance

So, why are the different types of psychedelics relevant in our historical lookback? In everyday discourse, people talk about psychedelics as a whole class of drugs, often without making a distinction of type. However, the dichotomy of type becomes quite important when one type of the drug has significant cultural and religious implications, while the other does not. In the 1900s, psychedelics began to be heavily regulated, and only recently has there been a significant push for change.

3- The Indigo Perspective

With this new wave of psychedelic popularization and the astounding investments recently seen within the space, we must also consider historical and social implications.

It’s important to recognize where these drugs came from, the first users, and above all else, be intentional about our rhetoric in this space. At Indigo, we are committed to our mission to improve mental health and promote inner transformation. As we look forward and continue to promote ventures in the psychedelic space, we plan to frequently look back at our history to innovate with people, politics, and culture in mind.

SECTION III: From the Regulatory Lens

1. The Controlled Substances Act of 1970

Prior to the passage of the Controlled Substances Act of 1970, which criminally enforced drug regulation, LSD was being researched for mental health treatment. However, when the 1960s counterculture movement spiked and psychedelics became the symbol of rebellion, the media began broadcasting the dangerous effects of LSD and other psychedelics. By 1968, LSD was banned, and just a few years later, the Controlled Substances Act categorized most psychedelics as Schedule I drugs, putting them under the classification as the most dangerous drugs on the market that have no medical merit.

2. What about Ketamine?

For those of you who have been following #psychedelictherapy, you may know that ketamine has been used as a medical treatment for decades. How so? In 1970, when most other psychedelics were classified as Schedule I drugs, ketamine was categorized as a Schedule III drug. Therefore, it remained legal for medical use and has been used to treat mental illness since. As clinical studies are beginning to indicate the effectiveness of MDMA and psilocybin therapy, their classification as Schedule I substances is being questioned. With additional research underway, we expect to see increasingly more psychedelics legalized for therapeutic use.

SECTION IV: Will Psychedelics be Legalized?

1- Legalization vs. Decriminalization vs. Deprioritization

With mental health progressing as a mainstream priority, psychedelics has placed itself as the go-to topic of discussion. However, it’s important to note that in many cases, the substances aren’t yet legalized; but rather deprioritized or decriminalized. This means that cities and states are either not prioritizing arrests and prosecution of psychedelic possession and/or use, or psychedelic use doesn’t have criminal penalties. The nuance here is that with #decriminalization and deprioritization, the drugs are still technically illegal, despite having little-to-no consequences in practice.

2- Activity Across the U.S.

Since 2020, states across the country have begun the process of legalizing, decriminalizing, and deprioritizing the use and possession of psychedelics. Oregon is considered the leader in this territory, having passed bills to decriminalize all drugs and legalize psilocybin therapy in 2020. This January, California Senator Scott Wiener (D) claimed that there’s a 50/50 chance his bill to legalize psychedelic possession will pass in 2022. Further, the drugs are already decriminalized in Oakland, Santa Cruz, and Arcata. In parts of other states, including D.C., Massachusetts, Washington, and Michigan, psychedelics are either deprioritized or decriminalized.

When it comes to the use of psychedelics for medical treatment, political leaders across the country — from Hawaii to Florida — are seeking approvals. What may surprise some is that support for psychedelic therapy is not solely coming from Democratic party leaders. In Texas, former governor Rick Perry (R) and Senator Ted Cruz (R) were two of the most passionate supporters of a recent law that authorizes research on the benefits of psychedelic therapy for veterans dealing with PTSD.

Could this mean psychedelics might be legalized on a federal level? Unfortunately, it’s not looking like that will be the case.

3- What’s the path to legalization?

It appears that psychedelic legalization will continue to follow a county and state-led path. Few experts in the space believe that a federal law will be proposed anytime soon. Further, it’s important to differentiate between the legalization of psychedelics for recreational and medical use. The founder of the largest psychedelics company, Atai Life Sciences, supports decriminalization. However, even he believes that legalization should be limited to medical use due to the powerful qualities of psychedelics.

SECTION V: Who Are the Big Players?

1- Academics Institutions & Non-profit Organizations

Academics and clinicians have been working diligently to prove the therapeutic benefits of psychedelics for decades. The Multidisciplinary Association for Psychedelic Studies, better known simply as ‘MAPS’, was founded in 1986 by Dr. Rick Doblin as a non-profit dedicated to researching and educating the public on the benefits of psychedelics. In fact, it was MAPS that financed the recent breakthrough study demonstrating the positive effects of MDMA therapy for PTSD treatment.

There are several prestigious academic centers in the U.S. dedicated to psychedelic research with the goal of proving their clinical efficacy, training clinicians, and educating the public. Among others, these include:

Mirroring other healthcare verticals, the psychedelics industry’s success rests on the ongoing collaboration between clinicians, academia, and the private sector.

2- Investors: Pouring Millions into the Industry

In 2021, over $730M was invested in psychedelics across 61 deals (up from $358 Million and 42 deals in 2020 and $63M in 2018). What’s causing this rapid growth? With the rising awareness of the mental health epidemic and the increasingly positive signs around psychedelics as a viable therapeutic treatment, investors are pouring money into the space. In 2021, 8 psychedelics companies IPO’d in the U.S. market, joining Compass Pathways (2020 IPO) to bring the total to 9. Globally, we are up to 70. Today’s psychedelic companies on the U.S. public market include:

  1. GH Research ($1.01B)
  2. ATAI Life Sciences ($854.97M)
  3. Compass Pathways ($529.45M)
  4. MindMed ($409.69M)
  5. Cybin Inc. ($134.28M)
  6. Seelos Therapeutics ($84.05M)
  7. Field Trip Health ($82.63M)
  8. Enveric Biosciences ($15.79M)
  9. Bright Minds Biosciences ($15.35M)

While the majority of dollars continue to go to funding biopharmaceutical companies on the research side, there has been substantial growth in investment around clinical and digital infrastructure to bring the substances to market. In 2018, no investment dollars went to either of those spaces and in 2020, $44M went to clinical and $5M to digital solutions. As psychedelics are legalized for medical use, we’ll see an increasing need to build companies that can orchestrate the delivery and commercialization.

3- Entrepreneurs: Bringing psychedelics to the masses

While psychedelic company IPOs are on the rise, the majority remain privately held. By the end of 2021, there were 119 privately held psilocybin startups, 6 LSD, 9 MDMA, 46 Ketamine, and 14 DMA. Venture rounds continue to be oversubscribed as venture capitalists flock to fund bullish entrepreneurs.

As Indigo is focused on investing in ConsciousTech, we are particularly interested in the delivery and commercialization piece. Some companies we are following include:

  • Mindbloom — Digital, clinician-prescribed ketamine therapy
  • Fluence — Educational platform that provides clinicians with professional certification and training in psychedelic therapy and psychedelic integration
  • MindLeap Health — Telehealth solution that connects people with mental health and psychedelic integration specialists to assist them on their mental health journey
  • Osmind — EHR solution for psychiatric and ketamine treatment

As increasingly more psychedelic substances are approved, we see tech playing a major role in helping to bring them to the masses by leveraging new and existing models.

4- Big Pharma: Where do they fit in?

While Big Pharma has largely stayed away from the psychedelics space due to its Schedule I status, things are beginning to shift.

In 2019, J&J’s antidepressant derived from ketamine, Spravato, won FDA approval. However, one stipulation required the drug to be administered in-clinic. With a market price of $6,785 for the first month and $3,450 per month thereafter, the drug was slow to catch on, bringing in just $100M in sales in 2020. Add to it that the IP ownership in the space isn’t strong, and commercialization is proving to be tricky.

However, we see much hope here. This past January, Mindset Pharma announced a partnership with Big Pharma company Otsuka Pharmaceutical’s McQuade Center for Strategic Research and Development, which is focused on researching new mental and renal health treatments. This not only validates Mindset Pharma’s IP, but also demonstrates a potential path for Big Pharma’s future fitting into the industry through partnerships.

For startups, getting clearer about the efficacy and IP of psychedelics is critical, as Big Pharma could be the answer to a rich exit strategy.

What’s Next?

It’s clear that 2021 was an incredible year in the advancement of psychedelics, but there is still much to be proven. Indigo will be keeping our pulse on the biggest players in the space, from academia, to the public markets, to startups, Big Pharma, and more. We encourage you to join the conversation by sharing your thoughts and ideas about the industry.





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Indigo is a Venture Lab dedicated to Mental Health and Inner Transformation. www.labindigo/com

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