New Covid-19 created canna-business opportunities Casual investors have learned that the rapidly evolving nature of the cannabis industry makes it difficult to find good cannabis investments. Matt Hawkins from Entourage Effects Capital joins Dan Humiston to talk about how the Covid-19 crisis has made it even more difficult. He discusses where he thinks the industry is heading and where the new opportunities will be. Produced by PodCONX
New Covid-19 created canna-business opportunities
Casual investors have learned that the rapidly evolving nature of the cannabis industry makes it difficult to find good cannabis investments. Matt Hawkins from Entourage Effects Capital joins Dan Humiston to talk about how the Covid-19 crisis has made it even more difficult. He discusses where he thinks the industry is heading and where the new opportunities will be.
Matt Hawkins: [00:00:08] This or that, you've got trillions of dollars in the hairs at that, every single layer of government looking for tax dollars. So why not go after the marijuana industry as a way to recognize real tax reform?
Matt Hawkins: [00:00:23] And so I really think we set the clock up on legalization. And as a result, getting to that point or even in preparation for it, there's been a lot of things that smart entrepreneurs will come up with to help.
Dan Humiston: [00:00:41] From an MJBulls Media, it's the Raising Cannabis Capital show.
Dan Humiston: [00:01:00] Today in Raising Cannabis Capital, we are going to take a slight detour from our normal format and instead of featuring a Cannabis company that's raising capital. We're going to be talking about post Kovil Cannabis opportunities with one of Cannabis industries leading investors. Matt Hawkins from Entourage Affect Capital. Matt, welcome to the show. Thanks for having me. I appreciate it. Well, I appreciate you being on the show with us today and sharing some thoughts on your insight as to where things are going to be or where things are today. And for our listeners who don't know Matt or haven't seen him being interviewed on CNBC. Matt was one of the first big investors to take a risk on Cannabis and an early investor in many of the giant Cannabis companies like Acreage and DTI and like over 50 top brands. So there aren't many people more qualified to talk about post Kovil Cannabis opportunities to get things started. Matt. Can you list a few ways that the pandemic has had a positive impact on the industry?
Matt Hawkins: [00:02:02] Sure, happy to. The main thing was the essential business designation that the industry received close to the start of the pandemic. That was something for me, at least unexpected. We were actually preparing our companies for the worst. Most people that listen to this program realize that even the larger Cannabis companies don't have a lot of cash on their balance sheet. It's almost like someone that goes paycheck to paycheck. It's kind of how these businesses are operated because there's no institutional capital in the game. With the essential business designation, we were able to stay open. We were able to have curbside pick up, you know, social distancing and the stores, we were able to provide lax delivery services from a regulatory standpoint. So all that led to positive sales increases. Up and down the supply chain and every single one of our sixty five companies across all of our funds and co-investment vehicles, Cobh, it has been a positive impact on their top and bottom line. It's awful to say that that a pandemic was given that. But when you're next to essential businesses such as pharmacies and grocery stores and liquor stores, what consumable good like this? Obviously, we've learned can be recessionary proof. And so that's the benefit we receive. That's the main one.
Dan Humiston: [00:03:17] I mean, think about it. Five years ago. We've never even considered Cannabis such business yet, as we say in Texas.
Matt Hawkins: [00:03:25] Who had a thunk it?
Dan Humiston: [00:03:27] That's for sure. Well, there are some changes, though. So what can Cannabis companies do today to position themselves to capitalize in this post colvert economy?
Matt Hawkins: [00:03:37] Well, I think we all have a lease of feeling, and I hope that we're getting close to the other side of it. I mean, just about every state opening up some form or fashion so that the hard part of adjusting to a Kofod world is that that hard work's already behind us. I think the systems and the implementation strategies are put in place. The beginning are going to carry through in some form or fashion until we please probably have a vaccine. So I'll put it the other way. I think the companies that weren't essential businesses are going to have a harder time adjusting to life after Koban than Cannabis will. So Cannabis will be uniquely qualified, I think, to live and operate in this environment productively.
Dan Humiston: [00:04:18] You know, that's an interesting point of view because I don't think many people would have thought that either, especially going into this. Is that kind of making the adjustments that necessary to survive? And Cauvin really positions you well for postcode it.
Matt Hawkins: [00:04:33] Yeah, I mean, let's face it, you know, every state seems to have a different re-opening strategy, but every single state still has social distancing. There's percentages that they can go into stores and restaurants, et cetera. Well, we've been deal with that already. We know the lay of the land.
Dan Humiston: [00:04:48] Sure, sure. And we're running our business differently than we did before. Kov it. And, you know, that kind of rolls me into my next question for our aspiring Cannabis entrepreneurs. They're listening to this show right now. Are there new or previously existing sectors that Cannabis has now made even more viable?
Matt Hawkins: [00:05:07] That's a good question and a tough one. It's probably too early for me as an investor to be able to opine on that. The opportunities that we see are more on the side of creating scale that existing companies that are in play. There's always going to be room for innovation and, you know, different brands and products in the emerging states. Let's back up a second and talk about another benefit of COGAT on the industry. You've got a situation where we're now essential. It makes common sense for us to be a legal recognize industry in addition to that. You've got the trillions of dollars and the CARES Act that every single layer of governments can be looking for tax dollars. So why not go after the marijuana industry as a way to recognize real. Tax revenues. And so I really think we've set the clock up on legalization. And as a result, getting to that point or even in preparation for it, there's many a lot of things that smart entrepreneurs will come up with to help ease that transition, for example.
Dan Humiston: [00:06:14] Again, another positive benefit is that once these state governments get through all of their appropriation bills that they have to deal with right away, the next thing they're going to start thinking about is how can we generate more revenue in this guy? As for especially for states that don't have a program in place, this is to be right at the top of their list.
Matt Hawkins: [00:06:33] I'd love to have an intellectual conversation with just the far right leaning smart politician who talked to me about the merits of not doing this. Let's face it, then, in 2014, the whole thing has been about converting to argument will legal.
Dan Humiston: [00:06:50] I want to take a short break to play you a preview of our next episode and to thank our sponsors ran just last year, weren't putting any of this on direct consumer market.
Chris Streeve: [00:07:04] Well, now, . has changed the retail, but shopping mall industry Cannabis consumers are even online, many picking up products curbside. You don't have the same reliability of putting all of your eggs in the tender basket to educate consumers on the value of your product and the differentiating factor.
Dan Humiston: [00:07:27] Tune in on Thursday for another episode of the Cannabis and Korona report with Chris Stream from Kroger Metrics. And now let's get back to today's show from an investor perspective.
Dan Humiston: [00:07:40] What are some characteristics or type of companies that you think are really going to thrive moving forward?
Matt Hawkins: [00:07:46] The value chain for the industry for now is set what part of the sandbox you can play in, so to speak, and improvements in those verticals are going to be opportunities. Now, having said that, as private equity investors, the first thing we look for are Khalida management teams. Even if we don't think the idea is that great, if somebody who has a track record that super talented has a similar super talented team, I would back that company for I would back somebody with not a great track record that had a great idea.
Dan Humiston: [00:08:19] Okay, that's where I think we're going to see some really interesting paradigm shift in the industry is that really smart operators from other sectors start to come in to the industry and a lot more regularity, and especially if your prediction becomes correct and states start moving in their direction and federal government starts moving the direction, it opens the door for people to say, you know, it's not such a weird idea now and maybe think about moving into this industry.
Matt Hawkins: [00:08:48] Exactly. Exactly right. I mean, look, I live in Dallas, Texas. I imagine the funny looks I got in 2014, we started to do this. And the very same people that gave me those funny looks now are ones that are either a wishing they got into it, be invested with me later. Three users now when they weren't before or four, maybe they still have a moral ethical position against it. That's the vast minority at this point.
Dan Humiston: [00:09:17] I mean, we have all experienced those same looks. And it's gratifying when we when we move to a different side of the ledger. But you talked about investing and especially now this is not a place for beginners, is there? And opportunities for people to invest in entourage of fact capital.
Matt Hawkins: [00:09:34] Yeah. We're actually raising our third bond right now. The interesting thing about the industry, even the public companies in most of their investors are all retail high net worth individuals, family offices because there is no institutional capital in the game. And so every single fund that we've raised thus far, it's come from high net worth individuals or family offices. So qualified or accredited investors are the backbone of our business. Absolutely.
Dan Humiston: [00:10:00] Well, we'll have all of Matt's information and an entourage of fact capitals information in the show, notes in it, MJ Bulls dot com. So you have more questions for Matt.
Dan Humiston: [00:10:08] You can soak up afternoon stock directly that wish we had more time. I appreciate you being on the show today.
Matt Hawkins: [00:10:14] Hey,
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