• September 29, 2023

Mindstate Design Labs Raised a $11.5 Million Seed Round

  • The psychedelics startup Mindstate Design Labs just raised an $11.5 million seed round.
  • Its investor list includes big names from Silicon Valley, including Neuralink cofounder Max Hodak.
  • Mainstream investors say there is starting to be less stigma associated with psychedelics companies. 

Mindstate Design Labs, a preclinical biotech company focused on developing “the next generation of psychedelic-inspired therapeutics,” announced today that it had raised an $11.5 million seed round to grow its team, develop its platform, and advance its lead MDMA-based compound through clinical trials. 

The round was led by Initialized Capital and also included investments from Metaplanet Holdings, Negev Capital, Day One Ventures, K50 Ventures, and Page One Ventures. Its angel investors include Max Hodak, who cofounded the neurotechnology company Neuralink with Elon Musk, AngelList’s former CEO Naval Ravikant, the cryptocurrency investment firm Paradigm’s cofounder Fred Ehrsam, and the Instacart founder Apoorva Mehta, among others.

It’s the latest signal that psychedelics are increasingly moving into the mainstream. While psychedelics startups struggled in the early days of the industry to garner interest and investment dollars from mainstream players, Mindstate Design Labs’ funding round marks a growing shift in how major backers, including Silicon Valley investors known for their investments in tech giants, are starting to think about psychedelics.

The industry has also seen more interest from traditional biotech VCs, major biotech companies, and even the famed startup accelerator Y Combinator, which has made several investments into psychedelics-focused startups. 

Mindstate is a Y Combinator startup, and CEO Dillan DiNardo, who cofounded the company with the evolutionary biologist Tom Ray, told Insider that the bulk of the total amount the company raised in this round came on Demo Day, an event at the end of each Y Combinator program when startups pitch their businesses to investors in a one-minute presentation.

“I do think that timing was really key here,” DiNardo said, pointing to the clinical studies that organizations like the nonprofit group Multidisciplinary Association for Psychedelic Studies, or MAPS, and universities like Johns Hopkins and Imperial College London have been doing around psychedelic compounds. 

These studies, DiNardo said, have helped to lay out the groundwork to show investors that there is now a “commercial viability for psychedelics.” 

Mindstate is designing a drug similar to MDMA as a mental-health treatment

Garry Tan, cofounder of the San Francisco-based early-stage venture-capital firm Initialized Capital, told Insider that he believes Mindstate’s focus on creating new treatments for mental-health disorders is something that “society is ready for and really, really needs.” 

Initialized Capital has $3.2 billion in assets under management — a massive amount compared to smaller VCs that have traditionally invested in psychedelics.

Garry Tan cofounder of Initialized Capital

Garry Tan, the cofounder of Initialized Capital.

Courtesy of Garry Tan

Mindstate says that through its artificial-intelligence platform Osmanthus, it is able to identify a particular state of mind that is therapeutic  — such as when those who take MDMA experience a state of empathy — and design a drug that will produce that state of mind in order to help treat patients with mental-health disorders. Its lead compound is similar to MDMA but with “a superior side effect profile” according to a press release by the company — and is being developed to address treatment-resistant post-traumatic stress disorder.

DiNardo told Insider the latest seed round will be focused on starting this compound in clinical trials by mid-2023. DiNardo said the company’s goal is to bring its lead compound through FDA approval but added that he envisions some of the other compounds the company develops through its platform to be accessible to other biotech firms through licensing deals and partnerships.

“The most important thing to understand is that the existing psychedelic states that we’re familiar with, the effects that are possible with drugs that already exist, are likely only a small fraction of the altered states of consciousness that are possible,” DiNardo said. What Mindstate is trying to achieve is to build out a vast catalog of those altered states to figure out which of those states of consciousness would potentially work best to treat different psychiatric illnesses. 

Last year, MAPS — a longtime player in psychedelics — published results from its phase 3 study on MDMA that found evidence of major positive effects on patients with PTSD.

DiNardo said that though MAPS is working with a similar compound to target mental illnesses, Mindstate’s lead compound would, if approved, hit the market after MAPS’ data-exclusivity period for its MDMA compound expires. This means that Mindstate wouldn’t be interrupting MAPS’ sales for a few years, and would bring a different therapy option to patients after that period.

For some investors, the stigma surrounding psychedelics companies is slowly beginning to fade 

Max Hodak, a Mindstate

angel investor

who left Neuralink in May 2021, told Insider that he had originally “steered clear” of many of the psychedelics companies that had been popping up in recent years because of their focus on developing, patenting, and profiting off of compounds that had been around for a long time. Hodak is the founder and now the CEO of the brain-interface company Science Corp.

Max Hodak, founder and CEO of brain interface company Science Corp.

Max Hodak, the founder and CEO of Science Corp.

Courtesy of Max Hodak

But Mindstate was different, Hodak said. The company was “actually pushing a new frontier forward, which was significantly more exciting,” he said.

Hodak said that in his mind, psychedelics are an “intellectual plutonium.” 

“They are very real and very powerful, but they’re also not a toy,” he said, adding that for him, the way to work with these compounds is to explore them in a responsible way and Mindstate’s business model was doing just that.

Despite this, Hodak said there’s still a stigma that exists around psychedelics that he’s keenly aware of.

“But I think we have to start trying to move past that by talking about it and by doing interesting science,” he said.