Famed investor Michael Novogratz said psychedelics will be the next 'short-term bubble' after cannabis - and predicts Compass Pathways will go public this year

REUTERS/Rick Wilking

Michael Novogratz.

• Investor and crypto evangelist Michael Novogratz says medicine derived from psychedelic drugs will be the next "short-term" bubble at a hedge-fund conference in Florida.
• Novogratz backed Compass Pathways, a UK-based startup working on bringing drugs derived from psilocybin - the active ingredient in magic mushrooms - to market.
• He said he expects the startup to go public later this year.
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Famed investor Michael Novogratz made a big bet on psychedelics - one he expects will pay off soon.

"I'm positive this will be the next short-term bubble because it's such a positive story," the former Goldman Sachs partner, hedge fund manager, and cryptocurrency evangelist said at the Context Summits conference in the Fontainebleau Hotel on Miami's South Beach.

To that end, Novogratz has backed UK-based Compass Pathways, a biotech working on bringing drugs derived from psilocybin - the active ingredient in magic mushrooms - to market.

"There's an awakening that these old drugs, these old plants, magic mushrooms or ayahuasca or the Iboga root from Africa have real positive medicinal qualities," Novogratz said.

Novogratz predicted the company will go public "before the end of the year."

A spokesperson for Compass Pathways told Business Insider that "we are always looking at options to ensure continued growth and funding," but that the company doesn't comment on "speculation."

The company raised a $32 million Series A funding round in October of 2018, per the data provider Crunchbase.

Richard Vogel/AP

Dried mushrooms containing psilocybin.

Psychedelic drugs hold promise for a range of ailments, from mental health to obesity

While the science is in its early stages, top-notch institutions like Johns Hopkins have developed programs to study the effects of psychedelic drugs including psilocybin, MDMA, ketamine, and others on a range of ailments including depression, obesity, Alzheimer's, and even smoking cessation.

And Compass Pathways is being advised by Tom Insel, the former director of the National Institutes of Mental Health, and David Nutt, the former UK government drug czar, among others.

The startup has landed some heavyweight backers beyond Novogratz. Peter Thiel, the PayPal co-founder and Founder Fund partner, invested in the company along with ATAI Life Sciences, a biotech company that develops psychedelic medicine for mental health purposes.

To be fair, companies like Compass Pathways aren't betting that magic mushrooms will be the next cannabis. The company is rather looking at developing drugs through specific, FDA-approved pathways instead of targeting recreational consumers.

ATAI Life Sciences co-founder and CEO Florian Brand said he remains skeptical of the legalization of psilocybin and other psychedelic drugs for recreational use during a recent panel at the Economics of Psychedelic Investing Conference moderated by Business Insider.

"We're focused on getting better treatment for patients, not so much what could be happening from a policy perspective in 12 years," said Brand.

Business Insider has previously reported on other startups and investors in the nascent psychedelic medicine space, including Field Trip Ventures, and MindMed.

Novogratz, though, thinks everyone should try mushrooms anyways - in the "right environment" of course.

"It's an unbelievable experience in terms of therapy," Novogratz said to a room full of hedge fund executives and investors.

• Read more:
• Investors are eyeing psychedelics as the next big trend in healthcare as medical-grade treatments inch toward FDA approval
• A startup backed by Peter Thiel has churned out 20,000 doses of magic mushrooms, and is making more
• Investors just launched the first VC dedicated exclusively to psychedelics, which they call the 'next wave' after the cannabis boom
• Evidence is mounting that psychedelic drugs can help treat diseases. Here are the most promising uses.

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