Texas may be behind the national trend around marijuana’s legal status, but one North Texan has staked a claim in the world of cannabis investment. He left Dallas private equity firm Tuscan Capital Partners in 2014 to found and serve as managing partner of Entourage Effect—previously known as Cresco Capital Partners—after seeing a market opportunity with marijuana becoming fully legal in Colorado at the time, but still federally illegal.
Because of federal legal constraints, cannabis companies couldn’t take part in commercial mortgages and other regulated financial services, and because cannabis startups were willing to pay a premium to private lenders Hawkins not only jumped into the lending market, he also decided to begin investing directly in cannabis-oriented businesses.
“I thought, ‘Why am I not investing in that guy, rather than just lending money?’” Hawkins told D Magazine. “I realized that this could be one of those generational wealth moments where I had the once-in-a-lifetime opportunity to get in on the ground floor.”
Entourage Effect has made almost 50 investments since its 2014 founding, all in various aspects of cannabis companies.
“We invest up and down the value chain because we believe there are opportunities throughout … there isn’t a sector of the business that we haven’t seen to date,” Hawkins told Dallas Innovates.
The investment strategy for Entourage Effect is relatively simple—offer high net worth individuals and family offices access to the legalized cannabis industry through diversified private company investments. What was most interesting about the cannabis market to Hawkins was the scale of the relatively untapped financial opportunity.
“[The cannabis market] is attractive because of the outsized returns that exist due to the federal illegality. There is a dearth of capital due to the lack of institutional money, so folks like us