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How a leading private equity firm looks at the sector right now

BofC Live is a podcast from Business of Cannabis. Delivering cannabis news and exploring the companies, brands, people, and trends driving the cannabis industry.

Matt Hawkins is the Managing Partner of Entourage Effect Capital – a leading US-based private investment firm operating and investing in the cannabis industry. Their mission is to actively leverage their sector and investment experience to identify, invest and accelerate high quality cannabis companies. 

Hawkins has more than 20 years of private equity experience and founded multiple $500+mm alternatives firms. He serves on the board of numerous cannabis companies and brings an extensive background in building large alternative investment firms and scaling the companies he invests in. In 2014, Hawkins had a vision to create the leading private equity firm focused specifically on investing in the legalized cannabis industry.

Learn more about Entourage Effect Capital and their investments.

Listen to this episode of BofC Live, and all BofC Live episodes, as a podcast:

Matt Hawkins | Transcript Highlights

We’re investing out of our third fund at this point in time. I like to say we’ve kind of matured along with the industry in terms of where we are investing right now. And our first bond, which was back in 14, 15, 16, or very early stage investing. But that’s where we were as an industry. Fund two was more of a 18, 19 vintage, and we were doing more Series A investing $3 to $5 million over the life of an investment and in companies that had revenue. No real earnings, but again, that’s where we were as an industry. And fund three we’re doing more growth equity investments, more scale buildings as we like to call them. And it’s with companies that have actual earnings and sometimes actual revenue, but sometimes you’ve done even some cases, some earnings. We’ve matured right next to and along with the industry.

I had people telling me back and 14 that I was crazy to be doing this. And so it’s really quite interesting how quickly the court of public opinion has changed on this [cannabis] such that it’s not only people want it to be legalized, but it is so mainstream now that it’s mind boggling from someone who’s been on it, been in this.

We obviously think both [banking reform and legalization] will happen. I think none of us know exactly what the timeline is. I’m cautiously optimistic that something could happen with the SAFE Banking Act this year. But you know, if we don’t start hearing something before the end of the first quarter about at least some type of a plan hen I’ll be less optimistic.

With respect to some type of legalization, I still think we’re three to seven years away, but that’s okay for us because we want to be investing in companies that, like I said, we can build scale around and the longer it takes to get there, the more opportunity for success that we think we can have with some of these investments.

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