Matt Hawkins, Founder and Managing Partner of Entourage Effect Capital- Interview Series

“Our due diligence process centers around the quality of each management team and identifying businesses that have the capabilities to scale before federal legalization. Ultimately, your investment is only as strong as the team behind it.”

– Matt Hawkins

200 million and counting . . . that’s the amount of money that Entourage Effect Capital has pumped into 70 canna-businesses across multiple fields since 2014. And 2014, for cannabis, was quite early. MyCannabis.com talked to the “swashbuckler” behind Entourage Effect Capitals audacious moves to understand why such optimism for the industry and what his projections for 2022 would be.

Matt Hawkins is the founder and managing partner of Entourage Effect Capital – the first cannabis-focused PE/VC firms in the space. He is known as one of the pre-eminent thought leaders and has been making major investments in cannabis since 2014. He's a regular on CNBC, Fox Biz, Bloomberg, Cheddar and he is a contributor for Kiplinger and Seeking Alpha.

Without further ado, meet Matt Hawkins.

As an intro, how did your career path lead you to the cannabis industry?

I had spent the past 20 years in private equity working with everyone from institutional firms to family offices. When legal cannabis markets began opening in 2014, I saw a first-mover opportunity to invest in the equity of cannabis operators through private lenders.

You have put in over $200 MM in cannabis since 2014. You must be very optimistic about the industry?

I've been confident in the industry's potential even when cannabis was only legal in a handful of states. Cannabis has created significant upsides for investors, especially once quasi-legalization occurs. While I'm cautiously optimistic on the timeline for federal legalization, it is just a matter of when not if.  There will continue to be several attractive investment opportunities in both the public and private markets, and there's no better time than now to start building scale.

Entourage Effect Inc. has been keen on sophisticated markets, like California. Will you be exploring newer markets in 2022?

Absolutely.  We want to be involved in markets where we know there will be opportunities to either consolidate pre-existing companies or provide them the resources they need to get to the next step of building scale. In 2022, new adult-use markets with sophisticated consumers, like New York and New Jersey, are extremely attractive to investors.

Recently, you joined the discussion at CannaVest which was about “Finding Unicorns.” What are some helpful hints for finding gems to invest in that you can share with would-be cannabis investors?

Our company invests in companies across the value chain, spanning cultivation, vertically-integrated companies, brands, science and tech, and ancillary services. Our due diligence process centers around the quality of each management team and identifying businesses that have the capabilities to scale before federal legalization. Ultimately, your investment is only as strong as the team behind it.

The much-awaited federal legalization. What's the outlook for 2022?

With SAFE Banking passing in the House for the sixth time in February, I'm tepidly optimistic about the bill finally becoming law. There is still a chance that the Senate will seriously consider and pass SAFE this year, but lawmakers have been slow to move forward. Passing SAFE and federally legalizing cannabis will have a consequential impact on the domestic economy and should not be used as a political bargaining chip by either party.

Parting shot: Thoughts on the 2022 cannabis landscape

Like every industry, the market will continue to ebb and flow. While we're currently seeing a lot of volatility and pessimism, these are expected factors that have also been constraining industry growth for some time. Despite these challenges, we're seeing companies demonstrate their ability to build scale in the face of volatility across the country. Cannabis is now legal in some capacity in almost 40 states, and increasing consumer and investor interest will hopefully pressure policymakers to create a pathway for stable banking opportunities.

Entourage Effect Capital is a Dallas-based private investment firm, dedicated to investing throughout the cannabis value chain. They were one of the first private growth equity funds in the cannabis industry, and they have allocated over $200 million since 2014 into over 70 companies, across multiple funds.

Thanks Matt for taking the time to share your insights for the cannabis industry from an investor’s perspective. It was a great pleasure and we look forward to having a couple other sessions with you. To keep up with what Entourage Capital is doing you can always check out their website.