Editors’ Note: This is the transcript version of the podcast. Please note that due to time and audio constraints, transcription may not be perfect. We encourage you to listen to the podcast, embedded below if you need any clarification. We hope you enjoy!
This week we are joined by Matt Hawkins founder of Entourage Effect Captial to discuss :
- Capital Challenges & Opportunities
- Investing in the Cannabis Industry
- Cannabis Political Update
About Matt Hawkins:
He has 20+ years of private equity experience and has founded multiple $500+MM alternative firms. Matt also serves on the board of numerous cannabis companies. He is known as one of the pre-eminent thought leaders in the cannabis space and has been making major investments in cannabis since 2014 (which is a long time in weed). He’s a regular on CNBC, Fox Biz, Bloomberg, and Cheddar and he is a contributor for Kiplinger and Seeking Alpha.
Big thank you to Colin Landforce for sharing our Cannabinoid Playbook. Sign up for Free Smoke
At Eighth Revolution (8th Rev) we provide services from capital to cannabinoid and everything in between in the cannabinoid industry.
8th Revolution Cannabinoid Playbook is an Industry-leading report covering the entire cannabis supply chain
The Dime is a top 50 Cannabis Podcast
Contact us directly at [email protected] Bryan Fields: @bryanfields24 Kellan Finney: @Kellan_Finney
[00:00:00]Bryan Fields: What’s up guys. Welcome back to the episode of the dime I’m Brian Fields. And with me as always is ke Finney. And this week we’ve got a very special guest Matt Hawkins, founder of entourage vet capital, Matt. Thanks for taking the time. How you doing today? Great. How are you guys doing, doing well? Ke how are you doing today?
[00:00:17] I’m doing really well. Excited
[00:00:19]Kellan Finney: to talk to Matt, excited to talk about, uh, capital in the cannabis industry. How are you doing Brian?
[00:00:23]Bryan Fields: I’m doing well. Thank you. And, uh, before we dive in a quick housekeeping, a big shout out to Colin land, for sure. Sharing our cannabinoid, playbook, everyone, go check out his newsletter free smoke.
[00:00:32] And if you wanna shout on our podcast, just share the cannabinoid playbook that can be found on our website. So NA, before we dive in, can you give a little background about you?
[00:00:42]Matt Hawkins: Sure happy to do it. Um, been in private equity for gosh, 25 years now. Um, all kinds of different things I’ve done over the years.
[00:00:50] And 14 is when I got into cannabis, started doing some real estate lending back then. Uh, but then my, I call it my luck and timing moment [00:01:00] is when I realized that, uh, there’d be a bigger opportunity investing in the actual cannabis companies themselves. Cause there’s a dirt of capital that as there is now.
[00:01:10] And that’s when we started raising our first fund. Um, now we’re three funds into this and we’re, you know, one of the longest standing cannabis investors in the space. So we’re, uh, very, very fortunate and very happy to be in the space. Um, happy to chat, chat with you guys and answer any questions.
[00:01:28]Bryan Fields: Yeah. I, I can only imagine what you’ve seen over the years since 2014.
[00:01:31] So I wanna start in those early days, what was it like? And was there any hesitancy to kind of enter in the cannabis industry?
[00:01:38]Matt Hawkins: Well, there was significant, uh, there was significant hesitancy, uh, because I didn’t, you know, that I went to bed at night thinking there was a chance I could go to jail. . So, uh, you know, that’s obviously a lot different now.
[00:01:52] Uh, but back then, that was a, a concern of mine. And, um, it was also not easy to raise capital, [00:02:00] um, because it was the first time, um, you know, it was our first organized fund, obviously, uh, in the space and it was, uh, not your everyday run of the mill, uh, product that we were. So, um, so yeah, it was, it was very nerve-wracking for a bunch of reasons.
[00:02:18] Um, different ballgame now, though,
[00:02:21]Kellan Finney: how much more mature are the companies that you guys are encountering in space, uh, today than they were when you first got into the industry?
[00:02:28]Matt Hawkins: So, um, I like to say that we’ve, our firm is kind of matured along with the industry. Cause if you think about it and our first fund was kind of vintage 14 to 17, And all that, all that was around back then were effectively startups.
[00:02:44] And so we were providing a lot of angel money, you know, pardon the fund, but seed capital and, um, you know, $500,000 to a million for investment cuz that’s what [00:03:00] these companies needed. And that, that way could move the needle. Um, fund two was. 17 to 19 vintage. And we mature with the industry. We’re able to do series a deals.
[00:03:13] So usually companies with some revenue, uh, you know, but, but maybe not much else. And, uh, but we could write three to 5 million checks cuz a, we raised more money and fund two that we didn’t fund one. It was, you know, with co-invest almost 80 million. Um, and so. That was kind of, that was our first, you know, really big fund, so to speak at least big for cannabis.
[00:03:38] Um, and now fund three, we’ve matured even further. Cause we’re, you know, raised 150 million, we’ve raised almost half of that and we’re investing in later stage companies and we’re more growth equity because those companies exist. And, um, we still do a little bit of a carve out through our partner. With, uh, art view [00:04:00] on venture capital for fund three, but, but a, but a smaller we done historically
[00:04:08]Bryan Fields: when you’re writing those checks with operators and providing that capital for them.
[00:04:11] Is there any sort of understanding of where that capital’s gonna be deployed or is it up to them to have car, you know, guidance on what they
[00:04:17]Matt Hawkins: wanna do with it? No, that’s, uh, I think any private equity firm will tell you that use of proceeds is a, is a, you know, a very, very important. Uh, part of the investment.
[00:04:28] I mean, you need to know, you know, that this capital’s being used to execute on the business plan that was presented to you, uh, you know, by the management team. Um, and any misalignment on that is a, is a huge deal. So we absolutely, you know, need to know that and need to be in agreement on it and usually align contractually as.
[00:04:50]Bryan Fields: Are there certain things that you’ve learned through, let’s say fund one, that fund three are absolute deal breakers. When you’re looking for this management team or for, for, can you give us some examples there? [00:05:00]
[00:05:01]Matt Hawkins: Um, no shortcuts on the under, uh, in particular management teams, um, you know, we, I don’t think we took crazy shortcuts.
[00:05:12] Maybe we did deals because they just. Too good to be true. But there was something about the management team that just that we didn’t feel right about and shouldn’t have done those deals. Uh, you gotta go your gut on, if you don’t feel comfortable with the operator or operators. And usually, uh, if there’s where there’s smoke, there’s fire.
[00:05:33] And, um, so we just won’t ever won’t ever do that, uh, going forward. And, you know, we didn’t do it very often, but we still, you know, learned our lesson.
[00:05:43]Bryan Fields: Given the current economic, you know, environment that we’re in, we’re participating in. Do you think cannabis operators need to be more, you know, uh, strategic with their investments or now you think is the time to growth with the opportunities for new states coming online and the opportunity for big expansion?
[00:05:56] What, what do you think there?
[00:05:59]Matt Hawkins: Well for [00:06:00] firms like us, this is a, a great opportunity. I mean, it sucks for the industry. It sucks for the operators. Cause you know, there’s very, very little capital valuations are at historic low. Um, but we’ve got capital and we can deploy it at very good valuations. So that’s a, that’s, it’s good for capital right now, but we don’t have an unlimited amount of capital.
[00:06:24] And until something happens federally, you’re not gonna have institutional capital come in and, and we’re gonna be stuck in the situation, uh, going forward, whether the markets are good or bad. So, uh, so yeah, I mean, it’s a, it’s an issue. And so
[00:06:40]Bryan Fields: with,
[00:06:40]Kellan Finney: with the limited capital, how do you guys kind of deploy it from a plant touching perspective versus an ancillary
[00:06:46]Matt Hawkins: perspective?
[00:06:47] There’s, there’s no real, uh, percent, but I think our, our. Our goal for fund three is to build scale in as many verticals as we can. So for example, um, you know, we, we’ve [00:07:00] made like two single state operator investments that are in, uh, in Maryland and wellness and organic in Missouri. And both of those companies are now using the growth capital that we provided to expand into other states and to continue their dominance in the states that are in or the state they’re in.
[00:07:17] So that’s a scale building. We also invested in, uh, uh, another example is, uh, how labs, which is the only commercially available THC breathalyzer that kind of measures your THC content in your body at that particular moment. Amazing technology for, uh, not only at some point, you know, law enforcement. You know, impairment’s going to be an issue in cannabis, just like it is in alcohol.
[00:07:46] And so transportation companies, logistics, companies, insurance companies that are gonna start to get involved there. I mean, that’s a opportunity for us to the capital and help this company build scale, become, you know, even more of a dominant player. So. We [00:08:00] just take a look at that and say, okay, where do we wanna do this?
[00:08:02] What verticals they attractive of, whether they’re plant touching or not. And we go after those and usually fund three is gonna be, you know, five, 20 million of life for the investment in you, helping these companies execute.
[00:08:18]Bryan Fields: With the lack of, with the lack of access to, to capital, what can other operators do if they don’t have institutional investors?
[00:08:24] Where else can they lean to kind of get that extra lifeline in order to kind of help them in their let’s say day to day,
[00:08:30]Matt Hawkins: it’s not easy. I mean, there’s no, there’s no real. You know, business friendly, uh, you know, commercial lenders. Um, if you’ve got real estate in your portfolio, that’s one way to do it.
[00:08:42] Cause there’s a lot of real estate lenders in space that are all, you know, good reputable companies that aren’t gonna, they’re not doing, you know, loan to own type strategies. Um, but there’s not a lot of options. I mean, it’s U it’s equity or real estate. Some [00:09:00] banks are starting to kind of dip their toe in the water with working capital lines or things like that.
[00:09:04] But until, you know, say banking act has passed, uh, we’re gonna be stuck there too. The bottom line is that we’re operating in the most, you know, inefficient capital market scenario that we ever will as an industry. And so that’s the good news and the bad news , you know, the bad news is we’re there. The good news is it’s, it’s typically not gonna be for much longer.
[00:09:26]Bryan Fields: Do you think it hurts just the operators or do you think it hurts the industry as a whole with the, the limited access to capital?
[00:09:32]Matt Hawkins: No, the industry as a whole, without a doubt, I mean, it’s a trickle down effect. I mean, even the larger MSOs have incredibly high cost of capital throughout their balance sheet and they’re not operating as, as efficient as they could.
[00:09:47] Um, and then that goes all the way down to the startups that are. So it’s it’s 100% across the industry.
[00:09:58]Bryan Fields: Yeah. And it, and it kind of [00:10:00] con continues to trickle down like the supply chain. We’ve had conversations with operators that said they’re waiting for payment from one in order to pay the other. And it just kind of continues down.
[00:10:08] And, and it’s, it’s one of those where I feel like if you don’t recognize the kind of hurdles that are going on, you don’t realize how much from a global scale it affects. Te can you kind of expand on some of those issues and some of those conversations we’ve had where operations have expanded on that.
[00:10:21] You mean like in California, where,
[00:10:23]Kellan Finney: uh, I think specifically with distribution, um, it’s just challenging, right? Where you have retailers that are looking to, uh, place more orders with brands and they just don’t have the cash flow to facilitate those, those orders. And so, um, how challenging it is it as a retailer, Matt?
[00:10:43] I mean, you guys have, um, a couple. Retailer focused companies in your portfolio. Um, could you kind of elaborate on some of the challenges that specifically like Harborside has faced in navigating those problems
[00:10:55]Matt Hawkins: specifically? Yeah. It’s not easy. Um, but CA let’s [00:11:00] just stay in California. For example, the, you have to have scale in order to be successful in California.
[00:11:06] I mean, the, the dominant players are the ones that have done what we’ve done at Harborside, which is, uh, You know, execute on a, on the CRE M and a, like we did with the acquisitions and, and sub, um, or do something like, you know, glass house and parent company have done. And to a certain extent on just building their verticals that, um, don’t have that much, you know, aggregate revenue and, and, and, and scale.
[00:11:38] You’re not gonna be able to survive in California. It suck. So, you know, mom and pop dispensed trees are gonna be sold on the cheap. Um, those are buying opportunities for companies like this listed different. Um, but, um, it makes it really, really hard. And, you know, the, the lifting of the cultivation tax is gonna help, [00:12:00] but it doesn’t make it, um, still doesn’t make it a whole lot easier, um, on the retailers.
[00:12:09] You know, it’s a, it’s, it’s a tough road to ho, but we’re at Harborside. We’re excited about the future. Cause again, back to my point, we’re operating in an environment that’s only gonna get better. We’re gonna say a shit of money. Um, that goes straight to the bottom line on this cultivation tax going away and.
[00:12:29] That’s gonna drive profitability for us, which obviously will shoot for how much do
[00:12:33]Bryan Fields: you think Harbor
[00:12:34]Kellan Finney: side’s, um, brand has played a role in their survival? I mean, they’ve been around for very long time in the, in the California market and they were kind of the staple for the longest time in Oakland, as far as like the premier dispensary and retail location.
[00:12:51] Um, how much do you think that’s played a role in their survival?
[00:12:54]Matt Hawkins: It’s helped a lot. Um, You know, every, every store we’re gonna have at it’s [00:13:00] what’s state household, which is what we’re soon to become. Um, every store will be called urban leaf with the one exception and that’s the flagship hardware side, the in Oakland.
[00:13:09] Um, so yeah, that’s a, it’s a, it’s an icon it’s um, but again, it’s operating in a very, very turbulent time in a city that is an absolute. Disaster area right in Oak Oakland is an absolute unmitigated disaster. And, um, but once again, we’re at the bottom and it’s gotta get, start to get better. I think. The bay area has finally realized the air and their ways with, you know, law enforcement.
[00:13:39] And I think behind San F changing, recognizing this crime, all these locations is, is close to permanently damaging their
[00:13:54] city. So. We’ll see what happens, but luckily [00:14:00] our, the brand has absolutely sustained and weathered the storm, um, in the city, that’s like a war zone.
[00:14:08]Bryan Fields: Hypothetically you are in charge of, of California. What would be the first thing you’d change in order to kind of help the industry, you know, evolve and move forward.
[00:14:16]Matt Hawkins: You’re talking about at the, at the state level, if I was in charge. Yeah. You at the state
[00:14:20]Bryan Fields: level, what would be the first
[00:14:21]Matt Hawkins: thing you would change? Huh? Well, I would, uh, immediately say that we’re gonna. Uh, pulled, you know, completely, uh, redo our tax structure to where we are incentivized as a state to shut down the illicit market in order to generate more revenue that would come in because we’re only converting about 40% of the market right now in the state.
[00:14:42] If that, um, I think Gavin Newsome is finally come to that, understanding that, um, he can only generate more revenue by, by, you know, going after the, the, you know, The the, the carrot that’s just sitting there waiting to be taken, which is the [00:15:00] illicit market, but you have to shut it down first. Sure. You have to tamp it down and you have to reduce the tax burden on the op legalized operators in order to convert users to where the cost is gonna be similar.
[00:15:11] If you get the costs in similar range, uh, people are gonna go to dispensaries. They’re not gonna buy it on the street. Look what happened to. I mean during the pandemic, we had a surge and we did have a tamping down of the, of, of the illicit market because of that very reason we had curbside delivery. The mean, t t held the cannabis industry, pioneered social distancing, and curbside delivery and pickup.
[00:15:31] I mean, my God. Um, so it, it could happen, but we just need help from the state houses. And California is absolutely a number one on that. given the
[00:15:43]Bryan Fields: current economic climate. Do you think we’ll see M and a from, let’s say some of the big tier one operators or from a smaller side, do you think they’ll be gobbled up by the tier one operators?
[00:15:51] Are
[00:15:52]Matt Hawkins: you talking about the large MSOs coming into
[00:15:56]Bryan Fields: California? Well, I’m talking about large MSOs kind of grouping up together and, [00:16:00] and forming a, a more stronger union versus a big MSO buying. Let’s say a smaller tier three operation.
[00:16:07]Matt Hawkins: I’m not sure. I see consolidation in play at the highest level like that.
[00:16:13] I think there’s still gonna be, you know, four to seven Dom MSOs, that’ll be gobbling up different states. And at some point they’re gonna enter California. Um, you know, that’s one of the things we did when we started this process at harm side. When we took over the board was I went to all those CEOs. We know all those guys.
[00:16:36] I mean, we were early investors in GTI. I mean, I know Ben personally, I mean, we know the guys at Cresco labs, cause we laughed about how we, you know, our original name was Cresco capital partners. And like, how the hell did we just pick the same name here? And so we, you know, I know Charlie, and so we talked to all those guys, we find out, you know, what, what are they looking for?
[00:16:55] The answer is to a man and to a woman [00:17:00] when they entered the state of California, they, they want there to be. A completely vertically integrated operated handed to them on a silver platter and, and Harborside. Now state households is that, and we’re just gonna continue to refine the business. We’re gonna do the drive profitability and integrate what we’ve done.
[00:17:18] And we’re gonna be ready to start talking to those guys, but we’re, you know, not quite there yet, but we’re getting damn close.
[00:17:26]Bryan Fields: How did you both have the same name? What was the, was there any sort of overlap.
[00:17:31]Matt Hawkins: Cresco was Latin for grow and I just Googled it back. Infourteen it turns out they did
[00:17:37]Kellan Finney: greats
[00:17:38]Matt Hawkins: alike.
[00:17:39] Yeah. And then we finally started saying back in
[00:17:46] S’s ridiculous. Getting confused one another and you know, they’ve got a brand we weren’t, so we weren’t naive enough. We were tired of being thought of as Cresco labs as, uh, you know, private equity. [00:18:00] And, you know, I think it was flattering for both of us, but at the same time, it wasn’t it’s time to go do our own thing.
[00:18:07] And we just said, look, our brand is our track record and we’ve got a good one and we’re gonna change our name.
[00:18:12]Bryan Fields: From a re from a retail investor standpoint. Uh, is there any sort of words of, of guidance you can provide for them? There’s been some anger and some confusion on Twitter about the current state of the markets, but in my opinion, you know, if you’re, if you’re confident in an operator and investment at a higher valuation at a lower one, you should feel even better.
[00:18:31] But given the current status, obviously it’s hard to feel that way. What would you say to those people?
[00:18:40]Matt Hawkins: I would say, if you’re committed to the industry and you have some money that you want, you know, put into the capital markets and, um, just deploy it, but stop looking at it because the reality is is that it’s this way until something happens legislatively. But when it does, it’s going to be, [00:19:00] you know, engaging and we’re not too far off from the same banking.
[00:19:06] We’re not too far off, uh, from hopefully something at the federal level could be 3, 5, 7 years away. But I mean, we think there’s so much value in, in not only the public companies, but even more so in some of these private companies. So we think the best time to be investing in cannabis is right now,
[00:19:26]Bryan Fields: is there a specific
[00:19:27]Kellan Finney: portion of the supply chain that you’re more interested in as from investment perspective?
[00:19:35]Matt Hawkins: Um, no, but I would say that the, probably one part of the sweat chain that we’re. We’re not interested investing in, it’s just, uh, cultivation all by itself. Um, it’s, it’s in
[00:19:58] for, [00:20:00]
[00:20:01]Kellan Finney: you’s a portion of the industry that needs, uh, more investment in a specific area of the supply chain to kind of help the industry move forward.
[00:20:11]Matt Hawkins: Um, that’s hard to say. I don’t think it is. Um, I don’t think one is, you know, more needed than the other. Um, it’s a, this is a, you know, a situation that’s is, you know, throughout the entire every sector industry.
[00:20:33] Um, and to your point earlier about having you. Robbing Peter to pay Paul to try to, you know, buy more product or, or distributors trying to receive capitals. They can buy more brands. I mean, it doesn’t until there is a, you know, a, you know, working capital availability, it’s, it’s gonna be tricky. But the amazing thing is is that this is still a, you.[00:21:00]
[00:21:00] $30 billion business, uh, domestic industry right now with, like we said, 30 to 40% of the market has been, um, converted. So the upside is just absolutely tremendous. And it’s only gonna get better. Like I said, I think, I don’t think we’re far away from. Say banking act passing. And when it does, you know, you’ve got banks now that are, that are starting to lobby because they want, they wanna do this.
[00:21:26] And I think, you know, commercially available loans at that point would be not too far behind the passage of that
[00:21:33]Bryan Fields: favorite under the radar operator, you think is poised to explode over the next two to five years.
[00:21:41]Matt Hawkins: Uh, well, it’s clearly in our portfolio.
[00:21:47] it’s, it’s, it’s like asking who my favorite, uh, kid is. Come on now. Everyone’s got a favorite, right? well, you’re not supposed to admit it, right. what’s theirs to,
[00:21:59]Bryan Fields: um, [00:22:00] what cannabis business or opportunity do you think is currently overlooked by eager entrepreneurs that are interested in entering the cannabis industry?
[00:22:07]Matt Hawkins: Wow. Um,
[00:22:11] Well look at Hal LA. For example, they took, they looked at a situation that was, you know, going to be a problem down the road that may not be a huge problem right now, but will be a tremendous problem. Um, sooner
[00:22:29] vision of looking past where we are now is what needs to happen when things get a little bit more, um, say normalized. Um, maybe we don’t know what those opportunities are. So having the, the vision to, to, you know, create solutions to problems that are either just beginning or about to occur are kind of where the great entrepreneurial minds go to work.
[00:22:54]Bryan Fields: What is one concept you have learned that would shock or surprise other individuals operating [00:23:00] in the cannabis industry?
[00:23:04]Matt Hawkins: Hmm. Maybe.
[00:23:09] That, um, well, I’ll tell you what else I’ll put it this way. I think there’s a misnomer that there aren’t good operators in the industry. And I would say that within the past couple, three years, we’ve seen a tremendous influx of fantastic operator to space. Look at ed Schwartz. Who’s the CEO now of, of Harborside slash statehouse ed.
[00:23:36] A former Goldman Sachs guy. He was the CEO of short COO of Patagonia. Um, then got it. You know, there was, uh, calx and he was CEO of urban leaf. I mean, he’s got track record of success, both inside and outside the industry. And so what’s great for investors like us is the industry is now mature enough to where you can underwrite operators based on their success, both outside and [00:24:00] inside the.
[00:24:00] Um, that’s just part of the maturation process of, of, of the industry. Cause it’s still so nascent, but getting easier to navigate.
[00:24:13]Bryan Fields: It’s been around for almost eight years. What did you get? Right. And most importantly, what did you get wrong? Oh, shit.
[00:24:23]Matt Hawkins: Well, we got right. What we got right, was that this is a real industry in that we’ve returned a tremendous amount of capital for our investors, um, and fund one, fund two and fund three. Aren’t far behind, um, I’ve built a team I’m proud of. I’ve got two amazing partners. Um, and it’s a joy to go to work every day because our team is really, really special.
[00:24:47] And, um, Probably let’s see biggest mistakes. There’s too many to even think it, the deals we passed on are, are, you know, [00:25:00] thinking evaluations are too high upsell for three or four of that. But, uh, you know, there’s and we made decisions on some deals that didn’t pan out. But at the end of the day, we’re a, you’ve got 20 plus investments in each fund.
[00:25:12] And. As much as I hate to admit it, you’re you’re gonna make, you’re gonna have
[00:25:19] any other investor. We want every deal to work out, but that’s not the case.
[00:25:25]Bryan Fields: Let’s do a quick, rapid fire, true or false Texas will legalize cannabis by 2026.
[00:25:32]Matt Hawkins: Yeah. False. It depends on well, that’s like, that’s actually not true. It depends on if Dan Patrick’s in office. Who’s our Alto. The answer is it will not, if he’s not in office, then potentially will at least have a more robust medical program.
[00:25:51] So
[00:25:51]Bryan Fields: is that a true or false
[00:25:55]Matt Hawkins: caveat? It’s all. Dan’s [00:26:00] your gut. He’s gonna be there in little. I I’ve Al I’ve always said that. I think it’s gonna be legal federally before it’s legal in Texas. Um, Go
[00:26:08]Bryan Fields: ahead. What under the radar state, do you have your eye on?
[00:26:14]Matt Hawkins: I don’t think there’s really any under the radar state.
[00:26:16] I mean, every, every state never a point now where you pretty much know which states are either, you know, have gone or are going. It’d be great if Florida could go wreck sooner rather later. Um, but you know, with states on the east,
[00:26:42] almost two out three Americans living in a state where there’s some type of legalization, I mean, that’s huge and what’s happening at the, and you, and you can see it at the political level. These knuckleheads Washington realizing that their constituents want this fast. And if [00:27:00] we can just stop getting the partisan politics and realize we can all come to the middle and realize two very simple things, we both want some social reform.
[00:27:09] We both want there to be, you know, commercialization, easiness for the industry. Stop putting them both. together Don’t make this either or ridiculous. And they’re just too stuck in their ways and too stuck on they’re either far right conservative or far left. progressive You Can’t see what you’re dealing with I think that’s starting to change the louder voices in the middle are starting to say hello wake up and other than just success.
[00:27:38] But this is a very, very good example of, of a industry that’s been used as a pawn and all these, you know, You know, political bullshit games that are being played in DC, and it’s just, it’s getting louder and louder to the point to where I think we’re, we’re getting closer than we ever had that
[00:27:54]Bryan Fields: psychedelics has a medicine.
[00:27:56] Yay. Or nay.
[00:27:59]Matt Hawkins: Oh, for sure. [00:28:00] Yay. It’s not for us this point, but I think, um, absolutely a, a wonderful Medica tool. I just think it’s entirely different world than the cannabis world.
[00:28:13]Bryan Fields: Favorite product category that you think will explode over the next five years,
[00:28:22]Matt Hawkins: man? Um, well, we’re gonna see a lot of things change in the banking world. We’re gonna see a lot of things, uh, you know, payment processing, um, You know, obviously ease of lending, you know, underwriting, all these
[00:28:54] things and tools, a lot buy for them to basically buy books of business on. Any of those things. I just mentioned as [00:29:00] long as they’re not as I call ’em bandaid solutions, if they’re real sustainable platforms that, uh, benefit the industry and the, uh, uh, financial institution, then you know, that’s gonna be something to keep your eye on.
[00:29:15]Bryan Fields: What causes more disruption in the cannabis industry, interstate commerce, or federal legal.
[00:29:20]Matt Hawkins: Interstate commerce 100%. I think the, my personal opinion is that ultimately we’re gonna see a situation where it’s gonna be quasi left up to the states and you’re gonna have states, you know, fighting hard for that tax revenue.
[00:29:36] They generate it there. Um, you know, in house at their state and they’re not gonna wanna give that up. And so, uh, that, that is a, that’s gonna be a really tricky thing to overcome. And I certainly am not smart to do that. Right. What year
[00:29:54]Bryan Fields: do you think we’ll have federal legalization?
[00:29:58]Matt Hawkins: Um, [00:30:00] I think we’re, I mean, I can’t do anymore than just say, I think we’re three to seven years away.
[00:30:04] It’s not best I can do. I just think it’s gonna be in the whole period of our third fund. I like it
[00:30:11]Bryan Fields: since you’ve been in the cannabinoid industry, what has been the biggest misconception,
[00:30:17]Matt Hawkins: um, that it’s a, you know, get rich quick type situation. Um, this is, these are, these are hard working companies that have been forced with tremendous headwinds to build their businesses in.
[00:30:33] Industry that is, um, you know, harder, harder to convert than people think. Um, but by the same token, it is something that is, you know, people that have worked hard and will work hard, are gonna get extremely rewarded because of the size of magnitude scope of this industry. Before
[00:30:53]Bryan Fields: we do predictions, we ask all of our guests, if you can sum up your experience in a main takeaway or lesson, learn to pass onto the next [00:31:00] generation, what would it.
[00:31:05]Matt Hawkins: Probably to go back to what I just said is the world sleeves work hard, whether it’s in cannabis or anything else, but, but this is not a get rich quick industry. Um, it takes a lot of, you know, blood, sweat, and tears to, to build companies in this space, just like it has anything else. The good news is you’re blessed with a, like I said, an industry that has already been created for.
[00:31:26] You just gotta go out there and execute and convert.
[00:31:30]Bryan Fields: All right. Prediction time. You already kind of teased it out. Matt is cannabis being used as a political paw, if so, why?
[00:31:38]Matt Hawkins: It absolutely is. And it’s because our political machine DC is an absolute disaster and it’s just, it’s like treated like a piece of pork in this, in these, you know, in the defense bills, the reconciliation packages, all these things that the safe making act has been, you know, Put in and pulled out, you know how more times we can count?
[00:31:58] What is it? Pass the house six times [00:32:00] now. I mean, it’s ridiculous. And, um, like I said, it’s gonna take the voices of the industry. I mean, we’re no different, we’ve been quiet for a while. We’re not, um, you know, we’ve, we’re gonna, regardless of what party you’re, you’re affiliated with, if you’ve got good ideas and cannabis, we’re gonna support you.
[00:32:22] Supporters, Nancy May who’s Republican in South Carolina has a, has a very simple solution. Like the states have. So leave up in the states. Republicans should be all over that because they love state route. Um, we’re against the, the Schumer bill, because he’s trying to do too much at once. He’s trying to, you know, pander to the far left with all the social equity, bells and whistles.
[00:32:43] Again, you can do them both at the same time. It’s no big deal. But, um, but yeah, it’s been a 100% political part.
[00:32:51]Bryan Fields: Isn’t it a layup though, with 70% of Americans interested in cannabis? I mean, is that the easiest thing for, let’s say a politician to kind of grab all the horns. I just am [00:33:00] shocked that, that people aren’t kind of jumping
[00:33:01]Matt Hawkins: at that.
[00:33:02] I, well, um, you know, bill Morris said it best. He, he said that, that he thinks that the Republicans are gonna steal this as an election campaign, uh, uh, platform away from the Democrats And why not? Just for that very reason, you just said, at some point, you’re gonna have to start catering to what your constituents want, whether you’re Republican or Democrat.
[00:33:24] And I mean, with what’s happening right now with the Roe Wade thing, there’s so many me, you know, misconceptions on what the Supreme court really ruled on. All they ruled on, said it’s up to the states and the states then have to be the ones to make the decisions. That’s where it’s up to us is people to elect the people at the state house that can make those decisions.
[00:33:43] But what it is, it’s, it’s also showing that there is a huge part of both parties, constituencies, that one versus the other, and the, the, the parties are gonna have to look at that, realize that they’re not speaking to their, to [00:34:00] their, their voters. And we’re an inflection point big time.
[00:34:05]Kellan Finney: Yeah. But I also think that’s why cannabis is such a.
[00:34:08] It’s used as a political pond is because it does have the support, it current it from the masses. And so they’re just gonna continue to use it back and forth to try to push other agendas because they figure if they tag it on to this, it might get some of those people in the middle to support their other agendas.
[00:34:25]Matt Hawkins: You’re exactly right. And it’s unfortunate, but it’s the reality of the world we live in.
[00:34:30]Bryan Fields: Yeah. So how do we get, if, how do we get out of this political pond? Right. Do we need to put another pond to replace the cannabis industry? Or like how, how does that kind of evolve? So to allow us to move
[00:34:40]Matt Hawkins: forward, I think we’re close.
[00:34:43] I mean, it’s, uh, louder voices in the industry, which is starting to occur. Um, we’re a small piece of that, but we’re starting to be more vocal in our political, uh, beliefs. In our political wishes, you’ve got, um, banks [00:35:00] that are wanting to enter the space. So they’re starting to, uh, lobby for that. Uh, and then I think elected officials are starting to listen to their constituencies that are, like you said, you know, sometimes close to 70% Gallup poll wanting this legalized.
[00:35:15] Um, and two outta three Americans live in the state, whereas you know, where it’s legal in some poor fashion. It’s gonna happen. It’s just a matter of where. Yeah.
[00:35:26]Kellan Finney: And I think as new York’s market comes online in New Jersey and the tri-states and maybe Florida gets passes rec you’re gonna see the total adjustable market size
[00:35:36]Bryan Fields: increase.
[00:35:37] Probably
[00:35:38]Kellan Finney: maybe even a hundred percent. Um, and when it, when it gets to be that big of a market, I mean, money is gonna do its thing and it’ll be pushed forward in my opinion.
[00:35:49]Matt Hawkins: Great. That’s
[00:35:51]Bryan Fields: so Matt, for our listeners, they wanna get in touch. They wanna send you decks for investment. Where can they find you?
[00:35:56] Um,
[00:35:57]Matt Hawkins: uh, EUC [00:36:00] partners.com. Uh, you can send me a [email protected]. Um, Yeah. I mean, we’re, we’re still looking at deals. We’re still raising our third fund. Um, incredibly excited about what we’re doing. Um, you know, despite all this talk, I mean, we’re, we’re incredibly bullish on where the industry is going.
[00:36:20] I mean, all these are opportunities, not, not really problems there means, like we said, we’ve been operating, you know, in this environment since we started. So it’s exciting that we’re getting closer to, to, to do a change. It’s only gonna change for better. Absolutely.
[00:36:34]Bryan Fields: Yeah. Now is the time to move forward.
[00:36:36] Thanks so much for taking the time. Matt. Appreciate the conversation.
[00:36:39]Matt Hawkins: You bet guys take care.
