Psychedelics Versus Cannabis: Exploring Different Paradigms Driving Investment & Financial Decisions

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Psychedelic medicine is setting a bold new precedent by redefining the way we are approaching mental health treatment in the modern day. While there are certainly some clear similarities and parallels between psychedelics and cannabis, there are some marked differences as well. This is particularly true when it comes to exploring the different paradigms driving investment and financial decision making across both industries. This poses several important questions for the industry at large. Are people approaching psychedelic investing like cannabis investing when they shouldn’t? What are the major differences between the two markets and how should this shape investor expectations?  

 

This guide will answer these important questions and more by exploring the paradigmatic contrasts between psychedelic medicine and cannabis.

Psychedelic Medicine and Cannabis Are Two Fundamentally Different Businesses 

Psychedelic medicine and cannabis are two fundamentally different businesses. The differences between the two drive the important financial decision making strategies exercised by investors. Whereas cannabis can fall under a wide spectrum of business structures that range from medical products and craft products (similar to alcohol) to agriculture, psychedelic medicine is more singularly aligned with pharma, biotech and healthcare. This focused clinical approach being taken by psychedelic medicine offers it a significant edge over cannabis businesses as investors, like Kevin O’ Leary of Shark Tank, are much more likely to support it. The lack of a recreational market for psychedelics is a massive differentiator for psychedelic medicine when compared to cannabis. Many investors are wary about investing in recreational drugs, whereas the clinical nature of psychedelic medicine makes it more akin to investing in pharmaceuticals. While investing in big pharma does require more research and knowledge on behalf of the investor, the rewards are generally greater.

Read Psychedelics Vs Cannabis: Exploring the Clinical Landscape

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The Problem With Cannabis is People Don’t Know How to Define or Operate It

When it comes to clearly defining the cannabis business in the modern age, there simply isn’t one single category it falls under. Currently, cannabis can be classified as a CPG (consumer packaged good), an agricultural business or a vertically integrated medical/consumer business. Since cannabis products are viewed as similar to everything from tobacco to pharmaceuticals, there is clearly a lot of variety when it comes to operationally defining the industry as a whole. Since investment decisions are founded upon such operational definitions, the ambiguity presented by cannabis has served as a disadvantage to the greater cannabis movement overall. Comparing this to the more clinically focused approach psychedelic medicine is taking helps clarify this point.

We had the pleasure of connecting with Mitchell Osak, a trusted advisor to cannabis and psychedelic companies, for this piece. As the CEO of Quanta consulting and a columnist for the Financial Post, Mitchell had deep insights to share about the “identity crisis” the cannabis industry is currently facing:

“The cannabis industry’s schizophrenia around how best to compete itself created an identity crisis.  There are significant operational and capital implications if you are a grower, brewer or a packaged goods company.   Given its clarity, psychedelic companies will not suffer these strategic growing pains” -Mitchell Osak

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Patient Centricity is at the Core of the Psychedelic Medicine Movement   

While psychedelic medicine spans pharma, biotech and healthcare, these three industries are governed by much of the same values. Most notable, patient centricity is at the core of the psychedelic medicine movement. Psychedelic investors hear a lot more about the patient than cannabis investors hear about the consumer in cannabis. Psychedelic investors are more often exposed to terms like “efficacy” and “standards in purity”, both of which are sparsely used in the cannabis space. Finally, drug development, research and intellectual property (IP) are much bigger factors to the psychedelic medicine movement than they are to cannabis. These important differences are driving much of the investment activity in the psychedelic space and help distinguish it from cannabis in important ways. 

The Depth and Breadth of Funding Between Psychedelics and Cannabis Varies Greatly

“Money follows efficacy” is the mantra in psychedelic medicine. A massive amount of funding is going into R&D to investigate psychedelic science and clinical applications of these powerful medicines. Indeed, the recent Compass Pathways prospectus shows they are leading the charge in funding research efforts. This is a notable difference when compared to the cannabis industry, as cannabinoid based drug development efforts have largely fallen to the wayside.

In connecting with Mitchell for his deep insights to write this article, he had to this to say about the differences in funding between the two industries:

“The depth and breath of funding is also a major difference between the two sectors.  While cannabis companies continue to rely primarily on retail investors and debt to fuel their growth, psychedelic firms will need to quickly tap larger pools of institutional and industry investment across the globe to fund their significant R&D needs” -Mitchell Osak

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Legalization Does Not Mean Recreation for Psychedelic Medicine

The term legalization means two different things when comparing cannabis to psychedelic medicine. While cannabis legalization went hand in hand with recreational use, the same is not true for psychedelics–especially this early in the game. Indeed, the possibility of utilizing psychedelics for psychospiritual use and personal development on a mainstream scale is indeed a vision some players in the space currently hold. However, this will be preceded by their clinical and pharmaceutical use. Drug development efforts in the cannabinoid space have fallen to the wayside and much attention is being paid to the recreational market. The opposite is currently true for psychedelics as it is currently witnessing significant biotech and pharma involvement. This contrast has major implications on the investment landscape between the two industries.

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Psychedelics Are a Longer Term Play Than Cannabis


Psychedelic medicine is a long-term investment play, meaning less pump-and-dump schemes compared to shorter term action in cannabis. While cannabis is all about quickly entering the market and scale, psychedelics are focused on clinical trials, research and longer time horizons. The level of medical responsibility associated with psychedelic medicine and the companies championing them far supersedes that of the cannabis industry. These differing trajectories between psychedelics and cannabis results in widely different investor expectations, ultimately leading to different investor communities.

Read: 3 Reasons Psychedelic Investing is a Better Longer Term Play Than Cannabis

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In the Long-Term, Psychedelics Will Draw a Different Crowd Of Investors Than Cannabis

The robust impact psychedelic medicine stands to have on treating mental illness across the globe is profound, shaping the investor base in important ways. Psychedelics often draw people who experience mental illness themselves or in those close to them. In this way, psychedelics seem to be more of a calling for these investors than the cannabis space is observing. Of course, many early stage psychedelic investors have indeed come from the cannabis industry. However, long-term projections signal different investor bases developing for the two sectors.  

 

While cannabis certainly has its fair share of investors who are in it for its therapeutic and medicinal properties, this does not account for the totality of their investor base. Indeed, the recreational aspect of the cannabis industry has undoubtedly drawn certain investor types while repelling others. 

 

Kevin O’ Leary of Shark Tank is a notable example of this, as he candidly stated his aversions to investing in cannabis but routinely expresses his support for psychedelics. Peter Thiel is another huge name in the investment community that has invested heavily in psychedelics but very little cannabis. The intensely scientific and research driven nature of psychedelic medicine has undoubtedly drawn a more sophisticated sort of investor when compared to cannabis. Those drawn towards biotech and pharma are certainly finding themselves drawn to the psychedelic space.

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Assessing the Investor Impact of Cultural Stigma In Psychedelics and Cannabis

There is no doubt that both psychedelic drugs and cannabis have been seriously culturally stigmatized. While the stigma around these drugs is slowly peeling away, there is still a long way to go before decades of prohibitionist propaganda can be undone. While both cannabis and psychedelics are stigmatized, there is far less stigma around cannabis. This is likely due to the fact cannabis is the most widely used illicit drug around the globe with countless people having tried it at least once. As such, this relatability has resulted in far less stigma towards cannabis. This is in sharp contrast to psychedelics, which carry far more stigma globally. However, this also means that those who do support psychedelic medicine tend to do so much more enthusiastically and for far deeper, more personal reasons. Indeed, many physicians are strongly backing psychedelics in a much bigger way than the medical community has backed cannabis. While the stigma around these compounds has certainly prevented their expedient reintegration back into mainstream society, it has certainly shaped their investor bases in big ways. 

 

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Closing Thoughts on the Psychedelics Vs Cannabis Financial Landscape

While the cannabis reform movement certainly helped pioneer the way forward for psychedelics, there are some notable contrasts between the two. This guide explored the important paradigmatic differences between the financial landscape for cannabis and psychedelic medicine. Both these dynamic industries are continuing to evolve in their own way. These changes are constantly shaping the nature of investing and the investors getting involved with both these industries. As the psychedelic renaissance continues to unravel, examining these important parallels and intersections between psychedelics and cannabis will continue to serve the investor community. 

 

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Stay Tuned to Microdose & Come to Psychedelic Capital For the Deepest Insights

Be sure to stay tuned to Microdose for the latest updates into the psychedelic renaissance. To get the deepest insights into psychedelic investing from top experts and thought leaders in the field, be sure to attend our monthly Psychedelic Capital conference–the premiere psychedelic due diligence in the world. You can get free tickets to the event here.

Gaurav Dubey

Gaurav Dubey

Gaurav Dubey is a dynamic clinical biologist, evidence-based branding professional and entrepreneur with a passion for scientific writing and traveling the world. He earned a dual bachelor’s degree in biology and philosophy from the University of Miami in 2011 and his Master’s in Biotechnology from Rush University Medical Center in 2015. Gaurav was recently published as lead author in the world's leading transplant journal, The Journal of Heart and Lung Transplantation, for a study investigating second-time lung re-transplantation. He is passionate about psychedelic medicine and recently accepted a position as content editor at Microdose, an opportunity he is very excited about. He is also the Founder & President of Karmik, LLC, an evidence-based branding firm for extraordinary life science brands.