BVE Insights: Psychedelics & Cannabis Capital Conference 2022

BVE Insights: Key Takeaways from Benzinga's Psychedelics & Cannabis Capital Conference

Q2: 2022 www.bve.vc

Contents Overview

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Psychedelics Recap & BVE Insights

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Cannabis Recap & BVE Insights

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The State of Venture Capital Investing

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Key Takeaways

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About BVE

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BVE Insights Overview: Key Takeaways from Benzinga's Psychedelics & Cannabis Capital Conference A collective of investors, entrepreneurs and advisors convened in Miami Beach on April 18-21 for the Benzinga’s Psychedelics & Cannabis Capital Conference series. The transition to a new normal was in full swing as attendance was very strong with three full days of panel discussions and presentations.

This marks BVE’s third full year investing in these sectors and we are pleased to see first hand the continued enthusiasm and excitement for the frontier markets of cannabis and psilocybin legalization. We convened with several of our existing and prospective portfolio companies and the key theme was emboldened ambition for the future.

Beneath all the exuberance however, there were some takeaways that would indicate any path forward should be tempered with patience and caution.

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Psychedelics Recap Keynote speakers, investors and entrepreneurs alike covered a lot of ground in the inaugural psychedelics capital one-day program. A variety of presentations shared research findings and personal stories of the transformative potential of psilocybin, ketamine and MDMA to help treat everything from PTSD and Treatment Resistant Depression to Migraines, and Pain Management more broadly.

Without many of the already public companies in attendance, the focus bounced from early stage venture capital to advocacy. Common themes centered on the need for more capital, that valuations are coming under pressure, and the push to make psychedelics legal across the board.

BVE Insights Our assessment is that a single day’s conversation is not nearly enough time to cover the many nuances of the psychedelic space, and that as a result, many distinct and individual topics become transposed and intermixed with one another. “Brand-building” was a recurring topic of reference, and while an important component of any strategy, it misses the broader point that the science of psychedelics, combined with true venture capital investment, are the two primary ingredients needed to adequately service this burgeoning space.

There is a tendency to oversimplify and draw parallels between psychedelics and cannabis. It is our belief that this is insufficient and does not take into account the many nuances of their respective and distinct markets. Similarities end at seeking FDA approval as the pathway to bring new, legitimate and legal drugs to market, to deliver positive patient outcomes. The recreational market for psychedelics will not develop in the same way that it did in cannabis and for BVE, is a moot topic at present.

BVE was honored to serve as the conference’s Spotlight Feature and presented our Five Point Strategy for venture capital investing:

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Focus on the Founders Be obsessive about operational excellence, due diligence and quality Provide more than just capital Proactive Regulatory Strategies Focus on Patient Outcomes

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Cannabis Recap Striking a similar chord as the psychedelics conference, the conversations on cannabis rarely drifted far from a focus on brands. What was interesting was how many of the MSO’s were talking about the need to launch their own brands. Could this be because despite being successful in creating scale, it is challenging to make the integrated dispensary model work and requires new ways in which to build value? This should be concerning to independent brands trying to operate in multiple markets.

BVE Insights Science will win the day.

At a private portfolio company dinner hosted by BVE, founders and management teams had one unified conclusion: good scientific foundations will form the basis of how companies will build value. This message was absent from the broader conference just as it was for the psychedelics discussion on day one.

Branding is flashy, science is not. We believe that the next generation of innovative companies to emerge from these frontier markets will be built on a bedrock of scientific discoveries, financial and operational discipline and delivering quality efficacious treatments.

The State of Venture Capital Investing At BVE we routinely look to the past to inform our future. It is always humbling and informative to evaluate prior predictions, especially when they have proven to be incorrect. Looking back two years to when BVE’s Founder and Managing Partner, Ross O’Brien, published Cannabis Capital, it was thought that more venture capital firms from outside of cannabis would enter the market, and with them, bring more capital and institutional investment discipline. The opposite appears to be true.

Many of the investors who were frequently featured at prior conferences such as these are no longer operating or are otherwise focused on alternative strategies such as SPACs, or spending an inordinate amount of time trying to save their struggling investments. As such, there are fewer and fewer venture capital investors actively deploying capital into early stage innovations.

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Key Takeaways The capital markets are going to be much more selective about where capital is deployed and capital will become more scarce.

Series A funding may have experienced a slight increase, but it still lags behind other stages of funding. BioPharma tends to be the exception here, but even this behemoth of a sector saw dips in the second half of 2021.

Attrition of marginal companies will become widespread and swift.

This is not a David and Goliath scenario, M&A activity may have temporarily slowed, but will rebound and significantly impact those struggling on the edge.

More green lights, less red tape.

Common sense regulation can actually be accretive to scientific innovation and recent government activity points in the right direction.

The Biden-Harris Administration supports research expansion into Schedule I substances, the DEA increased quotas for the legal production of controlled substances for research purposes, the NIH issued the first federal funding of note in 40 years to advance clinical research in psilocybin therapies, and the National Institute on Drug Abuse partnered with two biopharma companies for cooperative R&D on psychedelics as substance abuse treatments.

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Scientific innovation will underpin all value creation.

Companies need to be more capital efficient.

NOW is the time to shore up balance sheets and be as capital efficient as possible. This is an absolute necessity for survival, but also to be a viable investment target.

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About BVE Established in 2014, Bonaventure Equity, LLC (“BVE”) is a botanical life sciences venture capital firm. BVE partners with dynamic founders and management teams at the forefront of scientific innovation and commercialization. Along with capital, BVE provides access to regulatory, scientific and clinical expertise to support the teams we back as they pioneer transformative healthcare ventures.

Bonaventure Equity, LLC 500 N West Street Raleigh, NC 27603 (561) 320-2661 info@bve.vc bve.vc

The sole purpose of this outlook report being provided by Bonaventure Equity, LLC is to provide general information only and should not be relied upon.

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VENTURE FURTHER

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