Today's featured Cannabis Investor is Matt Hawkins The Cannabis Investor Series Sponsored by TWO12 is back for the Fourth year. This year, the Series will feature eighteen of the cannabis industry's top investors, reviewing the previous 12-months and sharing their 2022 investment strategies. On today's episode Dan Humiston is joined by Matt Hawkins co-founder of Entourage Effect Capital. Produced by PodConX TWO12 - https://www.two12.co/ Raising Cannabis Capital - https://podconx.com/podcasts/raising-cannabis-capital Dan Humiston - https://podconx.com/guests/dan-humiston Matt Hawkins - https://podconx.com/guests/matt-hawkins Entourage Effect Capital - https://entourageeffectcapital.com/
Today's featured Cannabis Investor is Matt Hawkins
The Cannabis Investor Series Sponsored by TWO12 is back for the Fourth year. This year, the Series will feature eighteen of the cannabis industry's top investors, reviewing the previous 12-months and sharing their 2022 investment strategies. On today's episode Dan Humiston is joined by Matt Hawkins co-founder of Entourage Effect Capital.
TWO12 - https://www.two12.co/
Raising Cannabis Capital - https://podconx.com/podcasts/raising-cannabis-capital
Dan Humiston - https://podconx.com/guests/dan-humiston
Matt Hawkins - https://podconx.com/guests/matt-hawkins
Entourage Effect Capital - https://entourageeffectcapital.com/
RC Entourage CI4
Dan Humiston: [00:00:00] today in raising cannabis capital, we are continuing this year's cannabis investor spotlight series with another former guest, Matt Hawkins, the managing partner at entourage effect. Capital Matt. Welcome back to the show.
Matt Hawkins: Dan. Thanks for having me.
Dan Humiston: It was good to see you too, and I'm glad you're back.
It gives me an opportunity. To respond to a comment that I received from one of our listeners last year, after your show, they wanted to know what the significance of the term entourage or fact was. And I thought that would be a great place to kick it off today. Maybe you can explain to that listener and all of our listeners, how that term applies to the industry.
And more importantly, how it applies to your.
Matt Hawkins: Yeah. Great question. So when I started the firm in 2014 our name was Cresco capital partners. And Cresco is Latin for growth. So it was an easy thing to pick and but then it just so happens. There's a little multi-state operator that chose a similar name. And then after a couple of [00:01:00] years of laughing with with Charlie at Cresco labs, we were both just sick of getting confused with one another.
And we probably got up more than them, but they got some too. And we just said, you know what, enough's enough, let's change our name. And one of my partners, Andy Sterner had reserved the name entourage effect, captain. And I didn't like it at first, but now I love it.
And the reason why he chose it is twofold. One is the entourage effect is the interaction between the THC and the cannabinoids in the plant that gives the most desired healing effects. That's the technical description, but for affirm, We really provide that entourage effect with the fact that when we come in and make an investment, we're very hands-on kind of a type of a network we bring hands-on to the extent that we need to be, but we really bring the contacts, the Rolodex, the relationships, the capital, the business, know how the board level management, et [00:02:00] cetera.
So that's the long-winded answer.
Dan Humiston: No, that's great. Because like you said, in a nutshell, it's more than just capital , you give your portfolio company. Your expertise in areas that they may be lacking in. I think that was probably really important and especially helping them navigate through the pandemic.
Maybe you can give us a quick update as to how your companies are doing.
Matt Hawkins: Yeah. I can't remember the exact date with which we talked last year, but as you can imagine from March until probably August or September, we were just. of making sure everybody , had enough capital. Luckily our second fund had enough capital in reserve for follow on investments for rainy day, so to speak.
And so , we did provide some additional slugs and capital to some of the companies, but at that point we started realizing that. Sales are increasing basically across the entire supply chain here we what's going on. And so we had the [00:03:00] pandemic effect there was a blessing in disguise for the industry, you know, our companies and our portfolio are continuing to do pretty well.
Now they're having to compete against numbers from last year, which are a little bit challenging because of the pain of numbers. We're probably, Bigger than what they should have been. So we're getting back to more normalized times from that standpoint and, things are still good.
We're not raising our third fund. We've made five investments out of that fund already. And so things are.
Dan Humiston: Oh, gosh, that's really encouraging. I know for the entire industry and I I've spoke to a lot of other investors preparing for this series. They're really optimistic. They say that the quality and the talent of the entrepreneurs is so much better today than it was even a couple years ago. And I know you were one of the first experienced investors to get into the cannabis industry.
Are you seeing that same thing or the quality of the entrepreneurs and the startups today better than they were a couple years.
Matt Hawkins: 100%. , there's no doubt about it and not only just the quality of the [00:04:00] entrepreneurs, but the quality of really seasoned, talented C-level folks that are entering the game. know, there's guys that were, CEOs of public traded NASDAQ and New York stock exchange companies that are now saying, you know what, I want to give this a shot.
And so, we've been fortunate enough to have a couple of, high level CEO searches that have provided some incredible talent that we've gotten to know. And now they're part of our ecosystem, whether we were hired or not. And it's been really great to meet those.
Dan Humiston: Yeah, that's just so another encouraging thing that we're seeing, which is great. I know during the pandemic, a lot of the companies valuations , were depressed clearly because of uncertainty. As things are getting a little bit clear. Are you seeing those numbers? Are those valuations getting back to the pre pandemic level or are they still a little bit lower?
Matt Hawkins: Things are are more favorable to the buy-side right now. And as they have been for a bit and that's a good thing
because I think they've become more normalized. And now the companies, both private and [00:05:00] public are having to say, okay, , there's no free lunch anymore.
It's time to roll up our sleeves and get to work and make the numbers that we say we're going to make. And otherwise there's going to be consequences. And whether that's a down round or. Shuffling the deck and management. That's just what, big boy industries do. And that's what cannabis is starting to look.
Dan Humiston: I couldn't agree with you more. But if you to look at it on paper, you're like the quality of their companies are better. Their valuations are more in line. And legislation is a lot less uncertainty. I can't imagine there's been a better time to invest in the cannabis industry than it is right now.
Matt Hawkins: I couldn't agree more. The evaluations are lower, I think during our investment period of fund three, we're likely going to see some type of legislation occur, whether it's as little as the safe banking act or something a little bit more robust at the, legalization front.
But . I'm not counting on it, but I still think it's going to happen while [00:06:00] we've invested in some of these companies , in the fact that our whole strategy and fund three is to build scale and advance of that. And so when we're writing bigger checks, investing in the larger companies, I mean, those are gonna be the first ones that are going to go get bought, or get, huge investments of capital from institutional funds.
Things are going to change dramatically. You're talking about tens of billions of dollars. It's on the sidelines, just chomping at the bit to get into this game. And we're really not that far away from it.
Dan Humiston: Man. It's a really exciting time to be here before I let you go. What are some of the other advantages to working or investing with entourage pack capital?
Matt Hawkins: We are one of , the longest term. firms in the space and we've probably got collectively more years of cannabis investing than any other group. And maybe the world is pretty amazing to say that, but with that brings a deal flow.
That is second to none. I mean, we see deals now that no one else gets access to, or we just create them ourselves. It's. [00:07:00] relationships we have. And so that is, what's been so rewarding for me as a founder, to be able to say that. , and I'm incredibly.
Dan Humiston: , I, and I, just to build on that, you see those deals a because every entrepreneurs that are raising capital know of your firm and your success rate, but also because you have relationships with other cannabis investors who say. Want to come in on this deal, is that.
Matt Hawkins: That's correct. We have relationships with other firms in the space that.
we'd like to co-invest with. We obviously have. Our own investors. Who'd like to co-invest with us too. But at this point while there's still this dearth of capital, everybody needs to be, paddling the boat the same direction, because , there's not enough capital to support all the great companies that exist in the space.
Dan Humiston: It's a good problem to have for somebody like you.
Matt Hawkins: Well,
it is, but by the same token is I'd love to be a. A fund manager with , a billion dollars under management, but getting that from high net worth individuals and family offices is a [00:08:00] Herculean task. I need some institutional capital.
Dan Humiston: It's right around the corner. I just feel like you are just knocking at the door. So, uh, we'll have all the links to the entourage effect capital in the show notes. So if you are one of those investors that are looking for a great management team, just click the link. Or if you're a company that's looking to raise some funds, I'm sure somebody from Matt's team would be happy to speak with you, Matt, always a pleasure to have you on the show.
Thanks again for doing it this year.
Matt Hawkins: Awesome. Dan, take care.