[00:00:00 - 00:05:11]

Will Smith: When today's guest first tried to raise capital for his fund quote, it was the easiest no ever from investors. He was literally laughed at. Doug Lepisto and his partner were raising a fund to build an ETA ecosystem in their local region. They envisioned working with searchers to buy businesses based in Western Michigan. Specifically the target businesses would be in that area, the searchers would live there and there would be a close association with Western Michigan University in Kalamazoo where.

Doug is a professor. The core idea was place based and long term. As Doug put it to me, if Brent be sure Warren Buffett, the search fund community in a university had a baby, that's what we would be Flash forward and Sleeping Giant Capital has done seven searcher led acquisitions and they're raising a second fund likely to be quite a bit larger than their first $34 million fund. There are many themes here, including how Sleeping Giant finds, vets and trains searchers. What exactly searchers are signing up for here and what are the economics, the non concessionary nature of these acquisitions.

That is, while it is impact investing, they do expect to generate market returns for themselves and their investors. Could this model be viable in other regions and much more? Doug and I go deep on his model. As you listen, ask yourself if something similar could be built where you are. Here he is Doug Lepisto of Sleeping Giant Capital.

Enjoy. It is competitive out there and many business buyers can't get traction with brokers or owners because they don't stand out in any way. Brokers dismiss them as just another inexperienced searcher. Sellers don't feel a connection with them and lenders hesitate to back them. Well, today, Thursday, September 11th, Athena Simpson, founder of AquaMatch, is returning to host a webinar on how to build a personal buyer brand that makes you memorable, credible, compelling on behalf of their buyer clients.

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Welcome to Acquiring Minds, a podcast about buying businesses. My name is Will Smith. Acquiring an existing business is an awesome opportunity for many entrepreneurs and on this podcast I talk to the people who do it. If you ask owners in the ETA and search community which insurance broker provides highest quality work, great outcomes and has a practice dedicated to searchers and acquisition entrepreneurs. One name comes up again and again.

Oberle. Oberly Risk Strategies has worked with hundreds of searchers over nearly a decade and is in fact led by a two time successful searcher, August Felker, which makes Oberle a specialty insurance brokerage for searchers by a former searcher. And if you've got a business under Loi, Oberle will provide complimentary due diligence on that business's insurance and benefits program. An easy no risk way to get. To know August and the team at.

Oberle to take advantage. Check out oberle-risk.com that's o b e r l e-risk.com link in the notes. Doug Lepisto, welcome to Acquiring Minds. Thanks so much Will. Great to be here Doug.

You're building Sleeping Giant capital. Sleeping Giant is a blend of a. Variety of models we've seen in the search world and in the long term hold world. And you've innovated a key ingredient, the place based nature of Sleeping Giant. We're going to spend quite a bit of time on that.

But start us off with a little. Background on you please Doug. Then we'll move into the origins of Sleeping Giant. Sure. So I, I come from, I would say non traditional mix of influences and backgrounds to get to where I am today.

[00:05:12 - 00:05:39]

Doug Lepisto: It's been a, a journey bouncing between the professional world, the business world and academia. And I don't know why I keep going back and forth between these two worlds. But that's, that's really been my trajectory. I mean I started off, went to college, no business classes. I went to a liberal arts school, psychology major.

Thought I wanted to do something in psychology. My, my girlfriend. You are Doug. You are. Yes.

[00:05:40 - 00:05:56]

Will Smith: Yeah. Well it's true. So I, I spent some time in advertising and then got a master's at University of Chicago. Thought I wanted to get a PhD in sociology. Then I, I, I, I left that and went into management consulting at Monitor Group in Chicago.

[00:05:56 - 00:07:09]

Doug Lepisto: Did a lot of corporate strategy, pricing strategy and so that was the bounce back into the, the business world and I bounced back into academia again and got a PhD at the Boston College Carol School of Management in Management Organizations and so did a traditional research based Ph.D. and, and dissertation and everything and then started up as a professor at Western Michigan University in the Hayworth College of Business and tenure track doing the publisher parish path and teaching and I, I went through that and then kind of a series of things here over the last five years. We started Sleeping Giant and so I founded that with my partner, Derek McIver, and so continued to be a professor at the Haworth College of Business and also run sleeping giants. So my trajectory has always been that, that mix of higher education explaining, let's say, and then, you know, doing on the, on the business side. So I think I finally maybe resolved that with my, my current arrangement of living in both worlds at the same time. And so is that to say that what kept you going back to academia is that you like to teach Question that, that's the question we, we, this audience will understand why you liked business.

[00:07:09 - 00:07:34]

Will Smith: We're all drawn to that. The question is what, what about academia drew you so much that you just couldn't quit it? Well, so I, I really enjoy some of the teaching side of things. I mean, to me, you know, I was thinking about, in preparation for our conversation, you know, what really motivates me about everything I'm doing, and it's really the opportunity for life changing moments. And that's with undergraduates, that's with aspiring owner operators, that's with sellers, that's with.

[00:07:35 - 00:09:17]

Doug Lepisto: And so I still continue to enjoy that. That part of academia is, is working with young people. But I think the other thing is there's just a huge amount of value in a business PhD. I mean, I think, you know, I was at a board meeting yesterday and they're teasing me, you know, piled higher and deeper and Dr. Doug and, you know, these kind of, you know, business schools are irrelevant and professors are irrelevant, and I think there, there might be some truth to that. But I also think that if we think differently about what that degree can offer in terms of how it changes how you think and how you approach problems and how you can draw on best practice in science.

I mean, there's a reason why Adam Grant is the number one podcast probably in the, in the world or Focus on Business. He's a, he's a PhD. Uh, and so I, I think, I think for some good reasons, PhDs have gotten a bad rap, but I think there's a ton of value in that, in that degree. And I, I think it should be more like an MD. You know, MDs are out practicing surgeries.

They're teaching surgeons, future surgeons, how to do surgeries, and they might be doing research and innovation about better ways to do surgery. I think that's a much more compelling, you know, vision of what a PhD should be than somebody who's, you know, locked up writing a bunch of papers and, and not really engaging or doing anything in, in the real world. Yeah, yeah, no, you you certainly get to have the best of, of both. And boy do I do I imagine that it gets old hearing business types tease you about, about being in academia. Business types love to beat up on, on professors.

[00:09:17 - 00:09:25]

Will Smith: Those who can't. What is it? Those who can't do teachers. Boy, that's got to be charming when you hear that all the time, of course you are doing. So that's, that's your retort.

[00:09:26 - 00:09:58]

Doug Lepisto: That's, you know, I think we're, we're hopefully doing, we're hopefully doing in a way that's, that's better than they can do. And so the, you know, the. I, I enjoy in some ways the, the teasing and the, the ribbing about, about that and I, and I think it's, you know, in some ways it's well earned. But hopefully I'm forging a path for others to, you know, consider when they join a business school or, or get a PhD that they think more broadly about what that means as a career rather than, than a typical, you know, lock myself away and, and publish for the rest of my life. So.

[00:09:58 - 00:10:36]

Will Smith: Yeah. Yeah, well, Doug, I in some ways feel an affinity for this. I share the sensitivity about it because as a podcaster talking about and frankly educating, but not having bought a business myself, you know, I, I could could be accused of the same. There's a fundamental thing here about, you know, doing and explaining, you know, that you need both of these abilities and, you know, yes, you know, you don't need to get the theory of the golf swing to be great at golf. You don't need to go to, you don't need to get the theory of the golf swing to go hit great golf balls.

[00:10:36 - 00:11:44]

Doug Lepisto: But, you know, the understanding some of the physics and the mechanics and, and best practice, I don't think that we should just throw the baby out with a bath water and say, well, that's science. And, and the things we strive for in terms of understanding. Expanding understanding is, is irrelevant. But no, it's, I don't fit in either world. The business people think I'm an irrelevant PhD.

The PhDs think I'm an evil private equity, you know, capitalist, you know, barbarian at the gate. And so I fit in in no worlds all the time. Well, that I feel like that's a good, a good metaphor for sleeping giant itself, which is also a bit of a mutant to you, to use your word to describe it. We'll get there. I'll say one more thing on.

This. Notion about business schools. You said a minute ago that some business types, you Were talking to the other day were like, oh, business schools I guess are irrelevant. And it's funny, I come from, my kind of first half of my career was in tech. And historically in tech they were very dismissive of the MBAs.

[00:11:44 - 00:13:18]

Will Smith: This has changed a lot because tech has become the establishment. So everybody goes to tech now. But back when I started, tech was still the domain of geeks and coders and purists and sure, capitalists, but not, not the, the business types, not the MBAs, not the, you know, the number guys. And I had that or that, that bias just because it was baked into me from an early age. And being exposed now to so many people who have gone to business schools, including the very top business schools, I mean, it just could not be further from the truth.

I mean I'm constantly of course impressed by so many people in this world and, and you know, what they, what they learned in their business programs. I mean even, even MBAs themselves will. Joke that business school is more about the connections you make than what you learned. But my impression is that, that a lot of these people who went to these business schools learned a hell of a lot while they were there because they, they certainly I have a deficit where they don't in some of the, the knowledge. So anyway, it's been eye opening for me and I really wish I had gone to business school at this point.

Okay, back to you. That's, that's also, and that's also, I mean, I think an outdated, I mean, you know, you think about the world the last five years. I mean we were already thinking at the time, my partner Derek and I, about the future of higher education. It's like, well, you could basically teach yourself on YouTube. And then the pandemic happened and then it was like, okay, well you really can teach yourself with YouTube.

[00:13:18 - 00:14:17]

Doug Lepisto: And now you've got, and that was before AI and now you've got AI and AI can teach you. And so you know, what is the value of going someplace to have people talk at you about something, you know, that, that, that's kind of an irrelevant idea. Now the knowledge dissemination as a concept is totally irrelevant. It might have been relevant years ago when you had to go to somebody to, to hear something and learn something, go to the library to actually get knowledge, that, that is an irrelevant idea. And, and with AI, the, the knowledge generation function of a university that's also going to become in my opinion, irrelevant.

And so if knowledge dissemination and generation are these ideas, these purposes that universities once stood for, I think technology is undermining what, that, what those things are? And so the question is, what is that need to be in the future? So I think, you know, it's relevant. It was relevant in the past. I think there's going to be a lot of change around that in the future.

[00:14:18 - 00:15:13]

Will Smith: Yeah, no, it's, it's a very interesting time for higher ed and we haven't even touched on politics. True. But, but if you want to take what you just said to the far extreme, you know, you'll hear, you'll hear tech utopian say that knowledge itself is about to be rendered irrelevant. Because if you can just tap chatgpt to tell you what you need to know on demand at any moment, why pack all that into your memory banks when it's just there to, you know, at your fingertips? So pretty, pretty provocative.

Great, Doug. Well, so, so now let's turn to the subject of today, Sleeping Giant. Tell us the origins of this and then we'll get into the definition of what exactly it is. Sure. Sleeping Giant really started with my partner Derek and I just kind of observing a few macro trends and kind of putting those, those pieces together.

[00:15:13 - 00:18:17]

Doug Lepisto: So the first thing we saw was we were both professors, still are professors, but we're looking for something that was going to change the trajectory of our, our teaching and really make an impact. And we were scouring around and, and Derek came across a case on how to buy a business from the folks over at hbs, did a little more research, and it's like, okay, wow, that's kind of interesting. This was back in 2019. You know, the most popular class at HBS at the time was, was eta. Right.

And that was before we understood what ETA was and, and search. And we looked at the case, and what's interesting was there's a little footnote that said the author of this case, who was a, it was an HBS case, was a professor, but was also an investor. And so we thought, well, that's, that's kind of interesting. Like professor investor, like that's a, an interesting hybrid. And then you look at the thesis there and it's Silver Tsunami and it's, you know, baby boomers retiring and a massive TAM and everything else.

And, and so that, that made sense. And then we looked out and we said, okay, that's, that's going to happen here in West Michigan. And so what, what could we do in West Michigan that would be relevant and appropriate here and adapt that, that model here? And then we also had these same conversations that we just had around higher ed and saying, okay, well, it's putting practice and doing, learning by doing, learning through practice is where the future is going to be if you can get knowledge and information. So, you know, we were, we were thinking about, well, how do we take a reinvented view of higher education and, and look at this trend in search?

And you know, we kind of realize that, well, if we want to really advance teaching at an undergraduate level and if you want to have a really legit ETA course, you need capital, you need a business, you need, you can't just talk about it and teach it. If you're going to tell somebody to take a life changing opportunity, then it's like, okay, well there's no capital around. You go figure this out with some SBA loans and some banks and kind of go off on your own. We realized that if we had a fund, we could both empower folks to follow this path and do that in West Michigan. And then we realized, well, if we had a portfolio of 7, 15, 20 companies, all of a sudden we have an ecosystem for training undergraduates and really blurring that line between higher education and the business community.

And so it was, it was kind of a confluence of those things that we then thought, okay, we need to, to try to raise a fund. And that kind of journey went, went from there. Looking for an SBA loan to buy a business. Then meet Pioneer Capital Advisory, your team for getting an SBA 7A loan quickly and at great terms. The team at Pioneer has closed 81 SBA loans in just the last two and a half years, with an average close time well under the industry standard.

[00:18:18 - 00:19:34]

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Let's now hear what Sleeping Giant is today. And then we'll, we'll, we'll really, we'll start to unpack it. Yeah, I mean, so we have, you know, you refer to it as a combination of multiple elements and I, I think that's really what we've done and what we've struggled with. In some ways is articulating what this thing is as a bigger, a bigger hole than, than its parts. I mean it's got, it's got a search, a kind of a captive search fund accelerator element to it.

[00:19:34 - 00:23:23]

Doug Lepisto: It's got committed capital, there's a higher education component at the university that gets linked into this. And you know, we, we're looking at what is the governing principle of all this and it really centers around being a place based alternative to traditional private equity. And, and let me unpack a couple of those features. So you know, traditional private equity, I mean we're, we're looking at cases where you know, a situation where a seller is going to be selling their business outright. These are majority buyouts of, of opportunities that we're looking at investing in share similarities with, with what traditional private equity would do.

But we're taking this place based approach and for us place based means West Michigan, that's up to Grand Rapids, over to the lake, you know, kind of down to Indiana, kind of over to the kind of the middle of the state. And that, that swath is what we are focused on in our, our place based approach. And what we saw was that there's a market of sellers who do not want to sell to traditional private equity. They don't want their company bought and sold in three to five years. And there's whether PE is earned it or not earned it, it gets a bad rap and it doesn't have a great reputation amongst a lot of sellers.

And so we, we, with this place based focus we realized that okay, well we can access opportunities that traditional private equity wouldn't. And by being place based we then started to add other elements that really organize around that principle. So if you're place based, you can't exit in three years. Who are you going to exit to? You can exit, you can only exit the people in your place if you're going to do that.

And so it incentivizes and makes sense to be a long term fund and to buy and hold and grow these companies over the long term. You know, if you're going to be place based, you want to be able to be connected to the service providers in your area. And so that means creating win win relationships with them that you preserve service provider relationships with portfolio companies instead of centralizing or you know, moving them to, you know, a provider on a, into a different place. And so you can start to see and I could go on and on this, this, that this notion of place kind of rippled through our model. If you're Going to be place based.

You, you need to find a way that you are engaging in mutually beneficial exchanges with your community. For us at Sleeping Giant, that's with Western, you got to pick your. It's not, we're not supporting, you know, different nonprofits. I mean our, our model is focused specifically on creating a mutually beneficial exchange with Western Michigan University where our portfolio companies are getting value and that the university is getting incredible value in terms of the educational opportunities. So the, that place based principle kind of ripples through our, our model and so you've got some inspirations there from ETA and search.

You know, we, we, we, we bring on aspiring owner operators and they're funded through a traditional kind of search vehicle. We've got elements of the search fund accelerator with the, the committed capital. We've got some, you know, Warren Buffett kind of long term hold co kind of elements in our, in our capital structure. And then this, this place based element I think is a little bit unique and the, the connection to the university is, is also unique as a, as a model. Great, great Doug, so much there.

[00:23:23 - 00:24:00]

Will Smith: Okay, first when we talk about the, the place based nature, let's just say it up front, is this social entrepreneurship, social investing. Is this a double bottom line thing is that I heard you use the word not concessionary in our pre call. Not a word I was familiar with. Explore that please, for us. Yeah, I, I think our, our fundamental premise is that, and I think you see this with the tariffs, you see this with remote work and coming back to the office.

[00:24:01 - 00:26:09]

Doug Lepisto: You see this with onshoring that this notion that capitalism was placeless is not true. Capital is always based somewhere. And where that's based matters. And we why that matters is when you're investing into a specific location and you're maintaining the control and ownership of those of those companies in those areas for reputational reasons, you're more likely to create, you know, win win exchanges with that place. You know, I could, you know, I was conversation at a board meeting yesterday and they're like well I have these really great, you know, financing option for you that's often Wall street and where we could actually, you know, bring some of our financing over over to them.

And I thought well that's great but you know, that's not elevating where I live and providing jobs and opportunities to where I live. And so what that focus on place does is it should create better economic development, smarter win win decisions locally. And we are doing that in a way that yes, we want to see that impact and we want to see that impact with our university and what we want our university to, to be better. But we are taking that in a non concessionary approach. I mean we should deliver results to our investors financially that are commensurate with a PE asset class.

And so we're not a impact fund in the sense that invest in sleeping giant and we're going to give you a return, but it's going to be a discount. We're going to give you 5% on your money. That we think that those things can go together and that we can deliver a great return. At the same time we're, we're making those decisions both with service providers and with jobs and with the university that elevate, elevate our community. But, but to press you on that, Doug, the financing decision, bringing in capital or financing from Wall Street's a great, a great example.

[00:26:10 - 00:27:17]

Will Smith: These businesses are going to be confronted by decisions all the time where the financial benefit could be higher by violating the place based philosophy. Right. So at some point they're going to have to make, you know, choosing to keep the financing local or regional. Maybe your terms aren't as good for the loan and which eats into your ebitda. The EBITDA of the business, which eats into, you know, the, the returns to investors.

So it's, so at some point there's got, it's got to catch up with you if you're not making decisions strictly based on, you know, the, the numbers in this, in. Yeah, I think you get my point. Yeah. Well, so my, my pushback to that would be, is, you know, I'm, I'm getting access to off market opportunities and sellers who believe in our long term place based approach and if I start making decisions that are maybe short term financially that give me a, maybe a better loan here in the, in the immediate. But my reputation in the marketplace becomes not the thing I want it to be.

[00:27:17 - 00:28:10]

Doug Lepisto: Well, I've, I've undermined what my, my model is and you can't, you're not going to be something that you aspire to be and that, that undermines the whole thing. So the, I think, I think when you take the long view that these, these short term decisions about concessions and how we think about, you know, the, the, the opportunity of, of you know, saving on a loan. But if you put it to Wall street it's like, okay, well, but then the relationships I built, built with these local banks who have referred opportunities to us. I mean they're less inclined to send opportunities to us because they know that if you buy this company, they're gonna, you're gonna send their business to another place. And so you know, I, I, I think it's at, at a hot, at a quick, short term view you can see that, but in the long term view I think you can still create that, that mutual benefit in those kind of place based approaches.

[00:28:10 - 00:29:16]

Will Smith: Yeah, well, and I, I, I think, allow me to, to put it in my own words, which is there is, you're getting access to opportunities. That is the opportunity to buy businesses from sellers who wouldn't otherwise sell to somebody coming in from New York, somebody coming in from the coasts, private equity, whatever they, they want to sell to somebody local, regional or to an interest that is local or regional. So you're getting access to these opportunities that's kind of alpha, to use a, kind of an annoying term you probably wouldn't use with them, but that is real alpha in real differentiation for you guys that you can buy businesses that others don't have access to, couldn't buy. And so maybe that's where also you are able to get advantage and offer a competitive returns to your investors that maybe some other private equity fund would not. Yeah, and I, and so it's, it's the, it's the, the opportunity to access those opportunities.

[00:29:16 - 00:29:59]

Doug Lepisto: It's the referrals that you get because you're place based. It's because of the relationships you build that drives relationships with aspiring owner operators that believe in your mission and believe in, and want. They, they don't want to move and they, they want, they want to be rooted in the same place. So the, I, I think they're, and that's, but your, your pushback is fair because it's, it's things that we think about all the time and I think that's one of the, the innovations or the, the things that we've really wrestled with is how you invest with that philosophy and still generate attractive returns at, at the same time. And where are those limits and how do you think about that in the, in the long term?

[00:29:59 - 00:30:27]

Will Smith: Yeah, yeah, very interesting. Let's hear more about just the format of Sleeping Giant, the mechanics of it. So you bring in searchers who are the principals who are out there doing the searching and becoming the operators and part owners of these businesses. Sure. The core functions of Sleeping Giant, let's break it down starting with the, the owner operator.

[00:30:27 - 00:33:21]

Doug Lepisto: So folks who are interested in following this career path in our community are typically the, you know, call them 30 to 45 year old mid career professional. They might be in our often Post mba, they're working at a big company. Their next rotation is to Europe or to Asia. They've got 75 layers of management above them. They want to be entrepreneurial, but they don't know how to, you know, satisfy that desire without starting a company.

And so we, so far to date this has only been word of mouth. They find out about Sleeping Giant and we offer them my a course called the Choir that my partner Derek teaches, which is a eight week, one on one coached course focused on eta. And so this is individualized exec ed on ETA is essentially what it is. And they go over all the nuts and bolts of, of that path and that eight week course. And after they're done with the course they can say, hey, I, I learned a lot.

I, I'm good where I'm at. They could say this is really amazing training. I want to go out and buy a company on, on my own. And last check we've had, you know, 10 to 12 folks go out and buy businesses out of that course and they're often buying companies that are smaller than Sleeping Giant would invest in. And so we're not seeding our competition, but we're creating entrepreneurs, you know, in, in West Michigan who are buying these businesses.

Or they could apply as a third pass. They could say, I want to come and join Sleeping Giant Capital and, and search with you guys. And so we've spent eight weeks with them and so we have a pretty good read on, on them as an individual and they have a good read on us. And that's building for us. That's building enduring relationships.

If we're not going to hold this thing for three years and we're going to hold this thing for a long period of time, we need enduring, meaningful, authentic relationships built on trust. And that eight weeks starts to do that. They then apply, they join Sleeping Giant as a, you know, we go through a whole rigorous application process. They join us as a CEO in residence. And then it's a typical search model where we invest in them.

There's a step up in equity on a deal that they close and then we provide the capital through our fund on any transaction that they, they do. And certainly always interested in them bringing capital to the equation as well. And so that, and then we find a, find a company, our team supports them, financial modeling, diligence, legal, we've got a whole, whole team helping on sourcing opportunities. And then once they close, then they're off as a CEO. Uh, so that's really the journey of a, of an aspiring owner operator that could come to sleeping giant or might become an entrepreneur in here in West Michigan.

[00:33:22 - 00:33:56]

Will Smith: And the economics for them are what. So their economics are we hope better than any other search model out there. So last time I checked, you know, you start to hear that it's that you know, 8 and a quarter, 8 and a quarter, 8 & a quarter 3 tranch kind of approach. You know, ours is, ours is 10, 10, 10. And a similar performance based economics in terms of, of vesting or you know, getting more equity.

[00:33:57 - 00:34:32]

Doug Lepisto: We're, we're looking at some different incentive models that really take into account this longer term hold approach. You know, there's you know, the IRR MOIC DPI thinking a little bit differently about some of those. And so those are, those are their, their economics which I think we, we're offering a package that would be at least as attractive or more attractive than. Than typical search than a tradition typical traditional search fund leaving aside self funded search SBA where they might own the whole thing. Correct.

[00:34:32 - 00:35:35]

Will Smith: And just to be clear on the, the three tranche style of traditional search, what people heard you say the eight a third, eight and a third. In your case, 10, 10, 10. So that's 10% for closing. 10% that vests over four years. So as long as they stay in the business for four years they've got 20%.

And then the final 10% is based on performance. As you were just saying, your performance hurdles are likely to be different than traditional search fund hurdles which are based on irr, I believe and imply an exit, a liquidity event. And so in this long term hold model that you have and that you're trying to encourage that IRR hurdle or metric makes much less sense. And so you're trying to figure out how to gauge performance after four years even though the, your entrepreneur is likely to continue to be in the business indefinitely, one hopes. Yes.

[00:35:35 - 00:37:35]

Doug Lepisto: And so and we, we continue to try to, we're continuing to innovate and think about this. You know, that's a, it's a long conversation right about sure. About IRR and then the shift to MOIC and some of these incentive plans that include moic. But it kicks in at a certain time period and then it's like well okay, well if we're longer term, I mean DPI really should be, it's cash back that really should be the, the, the, the notion and you know, you can, and what, you know IRR and you, what that means in terms of whether you're going to expand your multiple or not and how you Think, I mean there's just, there's just a zillion pieces that we're thinking there. I think one thing that's critical though that we have preserved as part of our model is that they get 10% at close meaning and that they, that they, we, we are not a find the deal, find the operator shop.

You know, we've really made a decision that we are find the operator, find the deal kind of shop and you get 10% as a result of that. And it makes it much more entrepreneurial, it provides more ownership and you know, control and it feeling like it's their search. I mean my partner Derek always says it's their search. I mean they could find an opportunity at Sleeping Giant that we're not going to invest in. And I mean we get roer on any of those opportunities, but they could go do, they could do something else.

It's, it's their search. And so I think that again creates a different model than typical PE where you would, you know, find the deal, find the operator typically. And, and those incentives would, wouldn't be nearly the same. Yeah, yeah. But again it is, it is quite similar to the traditional search fund where that entrepreneur is coming to you and you're deciding whether or not to invest in them and then kind of together or they go off and find the business but with your support and with the, with assuming you like the deal that they bring you basically, you know, three quarters committed capital.

[00:37:35 - 00:38:11]

Will Smith: If you like the deal, they know that they have a capital provider to buy it. Correct? Yes, yes, yes. And so we are a people first shop in that we are, we have industries that they're focused on when they come in and we've diligence those and we have a point of view on what we like and what we don't like in terms of where they're focused. But we are very much find the great person because at the end of the day that person needs to sit across from a seller and that seller needs to say this is the guy, this is the girl that I'm gonna transition to.

[00:38:11 - 00:38:44]

Doug Lepisto: So sure that that per people first kind of quality is, is I think critical in our model. Now these entrepreneurs, your searchers, you said are mid career. So these are not freshly minted, these are not your students. Unlike in the traditional search fund model where those investors favor the freshly minted MBAs coming out of all the, you know, the top MBA schools or the NBA or the business schools where the traditional search funds have kind of put a stake in the ground, the traditional search fund Investors have put a stake in the ground. This is not that.

[00:38:44 - 00:39:01]

Will Smith: So your tie to Western Michigan is not actually that the students, you're not feeding the students into these positions of leadership. Correct? The. We started with that as a premise that it would come through the MBA program. And what we realized is that that just really wasn't working.

[00:39:01 - 00:39:56]

Doug Lepisto: It wasn't, it wasn't a good fit. And we realized that the folks that were just coming through the MBA program weren't coming to do search. And I think at, at a booth or HBS or Kellogg, you have folks who come to those MBA programs, they know they want to do search, they've heard about it, they've read about it and so they're selecting in to do that. We had just a lot of mid, kind of mid career folks that were taking MBAs to, to upskill. They're very happy at their current job.

This notion of like leaving their company and saying to their spouse, oh, I'm going to go and take a risk for two years to try to find a company is just. There wasn't a, there wasn't a market there. And so, and that was an, actually a great, a great discovery for us because we have had just phenomenal, more experienced, more credible folks that we've been able to back as a result of that because they're coming from, from industry here in West Michigan.

[00:39:59 - 00:40:22]

Will Smith: Great. And so what does the portfolio look like today, Doug? So we're going to be closing here by the, I know by the time that this is, this is airing, we'll have closed our seven, seven investments, seven acquisitions. And so, you know, we're in that, you know, probably 90 to 100 million in revenue across those and maybe 300 and some employees.

[00:40:24 - 00:44:07]

Doug Lepisto: And so that's kind of where we are today. We're West Michigan based in our investment. And so we look, our portfolio looks like West Michigan. A lot of manufacturing, a lot of stuff that typical search wouldn't touch. So because it's because of the, the.

Manufacturing, because of the manufacturing heavy, heavy capex. And you know, so we do, we have a lot of manufacturing companies, value add, distribution. We're, we're focused on some technical services now. But you know, our investments are going to be in that, in that West Michigan area. And you've got, you got automotive in our state.

You've got office furniture up in Grand Rapids. You got med device up and down the 131, you know, highway corridor here between Grand Rapids and Kalamazoo. You got agriculture, you got consumer packaged goods with Kellogg. So you know, we always look at investments into the portfolio that have a geographic reason for being there. You know, they're close to these supply chains where they're unlikely to be moved.

Mexico probably isn't a good option. And so those are the kind of opportunities that we have invested in and will continue to invest in. And that 90 to 100 million in total portfolio revenue. How much deployed capital does that represent? I don't know the exact number offhand.

I probably, I probably wouldn't want to go into that right now. Okay, can we talk about what you, how many have you had a single fund vehicle or more and what the size of those funds is in our. Yeah, so I, so I can say that, you know, we, our first fund was 34 and a half million and we've also done a few little sidecars to, as a part of that in the, in the seventh seven acquisitions that we've made and then too early to announce. But we will be bringing to market a second fund here in the next. Couple months and, and directionally same size.

It'Ll be, it'll be larger, huh? Yeah. I also just wanted to try to understand the target profile of a searcher who's working with Sleeping Giant. These are larger than SBA deals. A typical transaction for Sleeping Giant is a enduringly profitable business.

It's been around for 30, 40. I mean we, we just did one that's 75 years old, very typically consistent in terms of their economic performance. Pretty boring often in the, call it 2 to 5 million in, in EBITDA size, 50 to 100 employees, usually too big for an SBA and you know, individual sponsor, probably not as sophisticated and large enough to be a PE platform, but in a pretty sizable add on or a strategic acquisition. Yeah, so it's kind of in that, yeah, 4 million earning zone where they're kind of, it's a little bit of a no man's land, but they do get calls from, from PE folks and, and they're kind of considering that as maybe some kind of option. And, and especially if they get to that, that four, five size, they might even start thinking about an ESOP as, as an exit option where we're almost, you know, in competition with that as an alternative as well exit to their employees.

[00:44:09 - 00:46:54]

Will Smith: You know that one of the most common levers to pull in a target acquisition is technology updating the systems of a business that may still be running off a spreadsheet or even pen and paper. But tech is complicated with tons of solutions out there. So choosing the right cloud platform CRM, telephony compliance and cybersecurity, not to mention implementing all that is a job in itself. Acquiring minds Guest Nick Akers knows this firsthand. As a former searcher who now owns Inzo Technologies, Nick has seen the tech challenges searchers face when acquiring businesses.

His team at Inzo regularly works with searchers and their acquisitions, offering a complimentary IT audit of the target company. Nick takes a personal interest in all their searcher clients, drawing from his own experience in the search phase. Enzo dates back to 1989. So this is a company that has managed the tech for hundreds of small businesses over decades. And one last thing, no long term contracts with Enzo.

A big differentiator. Check out inzotechnologies.com I N Z O or email Nick directly@nicknzotechnologies.com and don't forget to tell them you're a searcher. In our investing via Mines capital and we invest in independent sponsored deals. Our actual across our portfolio that it's about 4 to 5 million of EBITDA is the average acquisition of our sponsored deals. So I do, you're probably bumping up against independent sponsors.

So you know people out there doing small groups or individuals doing private equity deals. But as on a deal by deal basis, you know, not big private equity. Yeah sure. So let's, let's understand a little bit more about the value proposition to sellers or I should say the, the competition that you have. We understand the value proposition so a seller might consider pe, they've decided they don't like PE or they might consider an esop.

So just for you know, give the audience three sentences and on, on what an ESOP is most will know and then how do they choose between you in an esop? So in, in an ESOP they're going to ultimately sell the business to their employees. And an ESOP requires a tremendous amount of governance and a tremendous amount of infrastructure and administration to be able to facilitate and it usually requires companies to be at a significant enough size that that kind of those costs make sense. And it's, it's usually and there's a lot of complication around this. It's interesting.

[00:46:55 - 00:48:04]

Doug Lepisto: Grand Rapids is the ESOP capital of America. I think there's more ESOPs done in Grand Rapids than anywhere else in the U.S. you should check that. But I think it's, I've read that so you know, because these are, these are closely held family businesses often or they're second third generation but they're closely held and so an ESOP you're, you're going to defer a check and you're basically getting a Note at, in 10 years. And so, you know, you think about the time of getting your cash and you think about the administrative kind of elements of this, that converting to an ESOP is, is a, a significant undertaking and can be done. And so that, you know, to a seller you're saying, well, we're going to provide you with a much cleaner solution.

We're going to provide you. And often in an esop, if you're exiting, you might not have that succession solution. You can sell to employees, but that doesn't mean you have a CEO being, you know, there to be able to run the business. And so we're providing them with the CEO, we're providing them with cash sooner and we're providing that with them without the administrative overhead. Yeah.

[00:48:06 - 00:48:44]

Will Smith: You had said much earlier that you'll, you know, you can't do a private equity play here and sell the business in three or five or seven years. What do you say? What's to stop you from doing? I guess you could do that you own. Would undermine your brand, right?

I guess so when a seller is like, yeah, but once you own it, what's to stop you from doing that is the answer what I just said. The, the, the answer is trust. Right. You know, the. Could we, could we buy up 2030 West Michigan businesses and then sell them to the coast?

[00:48:44 - 00:50:10]

Doug Lepisto: That would be the end of Sleeping Giant. And that would be. And, and I think the, the important thing there is the reputational effects of place when you walk around and you know that you said one thing and you did the other. You can do that if you don't live in that place. There's no reputational shame network effect of like governing some of these transactions.

But I will. And so you know that, that is, that is an underappreciated mechanism that creates trust and allows you to do these kinds of things because you know, you get, we hear stories, sellers who have sold to private equity no longer wanting to wear their company gear to the grocery store. They're embarrassed, they know because that has gotten out into, into the community. And so it would be the end of Sleeping Giant if we, if we did that. And, and you know, we're, they're, we're basing our decisions on trust and authentic relationships with these sellers.

And, and that's what we're going to do. Yeah. Do your searchers have to already be Western Michigan based? Is that kind of something that you look to, to otherwise somebody, some searcher coming from Somewhere else could say they want to spend the next 10 and 30 years of their life, their life in, in West Michigan. But, and they may believe it, but until they're there, they don't really know how they'll take to the place.

[00:50:11 - 00:50:25]

Will Smith: So how do you think about where they're geographically based, all of our searchers? And I wouldn't, I don't think it's the wrong thing to say. Our searchers, the searchers we partner with. I mean, I think that's critical. They don't, they're not, they don't work for us.

[00:50:25 - 00:51:41]

Doug Lepisto: They, they are. It's their search. And so yes, they have partnered with Sleeping Giant, but there's again, nothing stopping them from doing a. So it's not, they're not our, they're not our ser. Searchers.

They're, you know, aspiring owner operators that, that we've partnered with. They're, they have all been from West Michigan here. And one of the, the other reasons why Place Based matters is, I mean, for us to take a, you know, there's often a question like, should I take a site visit? You've had a couple, you know, you had a conversation, you signed an NDA, you get some financials. It's like, okay, how much is.

Is here and should I take a, a site visit? Well, that means getting on a plane. That means logistics. I mean for us it's like, it's, man, we site visit all the time. It's.

Yeah, because it's, it's a short drive for us. And so the notion of somebody being based in another place would basically require them to move here. Now. We're obviously open to that. And West Michigan's a, you know, the Grand Rapids is consistently in.

West Michigan's consistently rated as a, a top place to live. It's a little, it's a little haven here on, on, on the lake, on Lake Michigan. So if folks wanted to move here. Yeah. But if they're going to search remotely, I'd say the odds are pretty low that they would be able to do that.

[00:51:42 - 00:52:56]

Will Smith: But you are receptive to people who say I'll move there. Oh, yeah, for sure. Yes. Oh, okay. Okay.

Because what I was getting to see that. Yeah, I would love to see that. Okay. Okay. Well, that, that obviously opens up your potential network of, of searchers you partner with dramatically.

Everybody listening now is, is fair game. Yes. Go back, Doug, to just the, the, the, that flow you described of somebody coming in to work with Sleeping Giant. They do this course with Derek. It's one on one what does that mean?

It's a, it's a couple hours a week and it's literally a zoom call with Derek. What does that look like? Yeah, so it's a, it's a eight week session or a course. It's a, basically they do an hour long either zoom or in person call and there's about a month of preparation and reading that needs to be done before the, the course begins and then it is tailored to the person. I, you know, I, I get really skeptical about some of the cohort based these big classes being able to do search because there's just so much personalization that you need to do to be able to make this effective.

[00:52:56 - 00:54:29]

Doug Lepisto: And, and so what Derek does is that first kind of week or so we starts to figure out after we, they've gone through questions about is this right for them and how are their finances set up and is their spouse. Have they had a conversation with their spouse about this serious conversation and gone through some of those. Then the question is, is like, what is the path that you're wanting to pursue here? Are you, are you wanting to do this on your own? And if so we're going to design the path for you to be able to do that.

If, if you want to do this with Sleeping Giant, we're going to craft it around that and, and, and focusing on a thesis that makes sense for them and really being smart about that. And so it's a really personalized oneon one experience where you are going to get, you know, someone who has, who has done it, who has, you know, facilitated both, you know, transactions through Sleeping Giant and through, you know, independent, you know, kind of independent path. But that personalization I think really matters a lot to crafting it for this person. Because this is not a certification, you know, this is not like I'm going to get a little extra thing. This is about a life changing decision.

And so that personalization matters and how. I heard you say, Doug, that, yeah, I've heard you say a couple times. I think that they can go through that experience with Derek, those eight odd hours, plus their own homework and prep and then choose not to work with Sleeping Giant. How do you guys, you know, protect yourselves against a lot of wasted time? I understand that you're trying to seed entrepreneurs in the region so there's, there's some knock on benefits even if they choose not to work with Sleeping Giant.

[00:54:29 - 00:54:46]

Will Smith: Same time, Derek's time is valuable. It doesn't scale. If you just have a lot of people coming through and choosing not to work with Sleeping Giant. So there's got to be some mechanism there whereby you are hopefully selecting for people who will actually work with Sleeping Giant. It's really a diligence question.

[00:54:46 - 00:56:30]

Doug Lepisto: Right. You sit down with these people and, and I, it, it's, it's just getting a read of where they're at and what they're trying to do. And to your point, it's, it's about a, a portfolio of folks where we're not going to be taking 100% of people into this course. That make no sense for Sleeping Giant. That doesn't make sense.

But we're open to folks who might come through and, and see this as a path that they want to do. If they came in and they said, hey, I want to go buy a tech, I want to, you know, a B2B software business in California, they're probably not a good fit. And, and Derek would say that, and this is not probably the right path for them, but they're thinking about, you know, West Michigan or even an individual search maybe on something smaller. I think that's something that we're open to. Again, we're not, we're not seating our competition typically with, with, with the training of, of folks who might go off and do this on their own.

And, and again, it's about, it's about trust and what they want to do. And you, you mentioned that. What's to prevent them from, you know, going off and doing on their own? And, and for us, it's also like there's plenty of people that have gone through that have applied that we don't take. There's no guarantee you take the acquire course, you're getting a Sleeping Giant.

I mean, we get eight weeks with you, so we really get to know you as a person. And, and, and as a part of that course, I should also mention is that there's also time that they get to spend with Camola, who is our financial analyst. I sometimes, you know, take a few conversations so they get exposed to the Sleeping Giant team in addition to just a, you know, a face on the, on the, the education. So that's kind of how we have currently thought about that question, but it's something we think about. Yeah.

[00:56:30 - 00:57:24]

Will Smith: You don't want to say what your second fund size is, but can you give us some sense of how big this could get? Because the other thing about place based is the TAM has, this is a low ceiling. So, you know, it's constrained by its very nature. And that's all well and good, but, but no, but there is a ceiling to this. There's only so many, there's only so many companies in western Michigan, so many sellers, so many retiring sellers.

And if you're doing kind of systematic outreach to, to the mall, you know, after a few thousand emails, you've emailed them all once sort of thing. So, so how do you think about the ceiling on this? It's a great question. It's something we think about the, there will be a limit. You know, as they're, as they're in, as in all markets.

[00:57:24 - 00:58:32]

Doug Lepisto: There is a, there is a ceiling on the ability to be able to deploy capital. And so how big is that ceiling right now? From what we see, there are more deals that we could invest in than we have CEOs were backing. And until, and, and the reason for the second fund is we're under capitalized and to take advantage of those opportunities. Let me just give you like a data point.

So in southwest Michigan, and so that's not broadly what this is. Not including Grand Rapids in southwest Michigan, there's 5,759 baby boom owned businesses that employ 72,000 people and 13 billion in sales. So let's market size that, so if you say, if you say 5,000 and you got 10% of that would be 501% of that, you got to 50 and even cut that in half and you got half of 1%, you got 25. That's, that's still a pretty significant. And we're not, that's, we're not talking about Grand Rapids.

[00:58:32 - 00:58:43]

Will Smith: Right? We're not talking about Grand Rapids. So there's the, the opportunity here is, is significant. So when, when everybody's like ah, Silver Tsunami, it's, it's in our experience that's, that's true. And it's big.

[00:58:43 - 00:59:37]

Doug Lepisto: So I'd say it's, it's limited in size. It's also limited in time. This baby boom movement is temporal. I mean it's, it's not going to be all once. At some point that transition ends.

So our, our sense is that we're still going to be able to do two to three deals a year at the size that we're looking at for the foreseeable future. And at some point that, that, that could run out and, and we're going to cross that road when we, we cross it. But that's what we're thinking about it right now. Doug, people will be shocked that you feel that the bottleneck is actually searchers, not businesses. As you, as you just did the data for us because so many people listening to this will be in a search and will be getting nowhere and being out competed and being really frustrated by the inability to find a business to buy.

[00:59:38 - 01:00:10]

Will Smith: So interesting to hear that you're just got so many opportunities but not enough searchers. So I guess I'm just calling that out. Call Doug everybody if you want to live in Grand Rapids or somewhere in. Western Michigan or West Michigan. Yeah, I mean, and some, I mean I can think of a few offhand where we're, you know, there's not a, not a great fit and you know, and, and some of these are, are opportunities that are going to take some work and they're going to be long term plays that you're going to really, you're not going to get rich fast with us.

[01:00:11 - 01:01:35]

Doug Lepisto: And that's, that's just the way that that works. You're not going to exit in three to five years. And you know, we, that's just how we're doing this and we're incentivized to, to do that as well and to think long term. So there are more opportunities, I would say than we have owner operator, aspiring owner operators right now in, in West Michigan. And I know for a fact from talking to brokers and other bankers, they know the search people.

And anytime they see it here, a search person, they're like, do you have committed capital? And then there's that kind of like, well, you're going to be honest and say that you don't or you're going to really have like committed capital. And so we show up, everybody knows Sleeping Giant. I mean it's becoming the fact that, I mean people know Sleeping Giant in West Michigan and they know we have capital, they know we're place based. And so there's just more opportunities you get exposed to again because you are place based.

Nobody knows Sleeping Giant in Topeka, Kansas or you know, fill in the blank, but they do here. And so I think that's a relevance for our model. And it's, and it's, and it's why we get excited about the idea of Sleeping Giant being in other American communities because the same things that are happening here are happening in other places in the United States where Sleeping Giant could be effective. Yeah, well, we're, and we are going to close with, with that in a few minutes. Sleeping Giant.

[01:01:35 - 01:02:02]

Will Smith: What does the name mean? I could hazard a guess, but why don't you just tell us? Well, Derek would, would tell you this fancy story about, you know, all these different meanings, but basically his hometown in Thunder Bay, Canada, has some island that is called the Sleeping Giant because there's gold under it. And he really, and he, he brought up this idea of the name. And I just like the name.

[01:02:02 - 01:02:48]

Doug Lepisto: I, you know, the meaning, you know, you know, you, we, we could tell you a story about, you know, it's sleeping giants in terms of we're buying these companies that are, you know, could be giants and you know, our community, West Michigan is overlooked and it could be a big, you know, and all these things work. I, I mean to be honest, I just. We like the name. Yeah. So we have.

It gets confused with Sleeping Bear because Sleeping Bear Dunes is very popular up in northern Michigan in the Travers City area. So that, that was really the, the, the impetus of the name. Yeah, it is a great name. Whatever it means. It can mean lots of things.

But it sounds cool, right? Yeah, well, it sounds cool and maybe the, the idea that you, anybody like can project their own meaning onto it is useful. It's like it kind of engages you. It's like what do they, what do they mean here? Exactly.

[01:02:48 - 01:03:40]

Will Smith: And it, you know, it grabs you in that way. It's cool. Makes you think. I appreciate that.

Let's, we're going to start wrapping up here in a sec, Doug, but let's tell us a little bit about how you raise long term capital. Because now in my seat in mind's capital, very sensitive to the fact that when you have LPs, they want to know when they're going to get their money back. So of course there are pools of capital. Family offices are kind of the, the example that are much longer term, more patient. Think in terms of MOIC and cash cash generation rather than irr.

Is that the answer? Is it family office capital? Tell us how you went out and raised money. Well, that the answer is is slowly and painfully then all at once. And you're right, it's family offices.

[01:03:40 - 01:04:35]

Doug Lepisto: I mean I remember the first time we were kind of proposing this idea of being place based and long term and this connection to university and I got connected to a fund of funds in. I think it's, it was in Illinois and I'm pretty sure the person laughed at me literally like you guys are just absolutely morons of how you think that anybody's going to invest in this and because you weren't giving them a five year and the TAM is small and you got this university thing and isn't that a distraction and you know, I mean the, the litany of things of how this doesn't make sense. Right. And so you know that was, that was one of these moments that I look back on and when we announced our second fund and, and we reflect on so far we've gotten it. It does give you a little, those moments do give you a little bit of little juice to keep, to keep going of.

[01:04:36 - 01:04:41]

Will Smith: Chip on the shoulder. A chip on the sleeping. Don't wake the sleeping giant. Don't wake the sleeping giant. Exactly.

[01:04:41 - 01:06:42]

Doug Lepisto: Exactly. And so, and so you're right. And so institutional investors, I mean they see first time, I mean they see, they see us. And then you add first time fund, first time fund manager. I mean that is the easiest no ever.

Nobody's losing their job. Nobody's losing their job by saying, you know, no to us. They're not losing their job to that. They're losing their job by saying yes to this thing. And so, you know, for us it was, you know, your place based.

So where are you going to raise capital? You're going to raise capital from the place. And so it's high net worth individuals, family offices that, you know, and there's significant wealth here in west Michigan that, that saw what we're doing, believed in the long term vision of what we could do and, and could see this thing having this kind of compounding, you know, growing effect, you know. And I think also this, this, this, I think people are also done with this idea of that PE gives the returns back in three to five years. That's total.

They're giving it back in 7, 10, 15. I mean these things. Why are there are so many continuation vehicles and, and all this discussion? No, and so it's, it's kind of fake talk about that being the, the case. There's high performers out there that are doing that, no question.

And kudos to them. Yeah, but I think that's a myth. And then, you know, I think the other fact is, is that you've seen a lot of long dated vehicles coming out from, from big funds that are these 15, 25 year term kind of vehicles. You got Brent Bior over at Permanent Equity raising, you know, a quarter of a billion dollars with a 25 year fund. You got Cambrick, which is a Warren Buffett protege, which is like massive long term.

I think she raised, you know, a couple hundred million and with the interest rate environment has, has definitely made that a thing that people are going to consider. And I don't think that's, I don't think that short termism is coming back. I don't think interest rates are going to zero. Where we had that kind of dynamic where you could, you could buy and financially engineer these things. I think that's, that's over.

[01:06:43 - 01:07:38]

Will Smith: Well, there, there's certainly a, a very rich philosophical conversation to be had around short termism versus long termism. Whatever. Interest rates are great, Doug. And then the Western Michigan tie in, the searchers you partner with are actually not coming out of the school. So you're at the school as a, as a professor.

But what else is the tie in now if the searchers are not coming from there? Sure. So we, I run a program called Leadership and Business Strategy. We, we call it LBs. And what that program really is designed around is that it's a, a training experience that culminates in a, an engagement with a portfolio company of Sleeping Giant Capital on a, a new market or new geography or new product question.

[01:07:39 - 01:11:17]

Doug Lepisto: And so that we call it a practicum is done here at Sleeping Giant downtown kalamazoo. We take 40 students, we deploy them onto 12 teams and we're going after exploring different markets that might produce outsized returns for our portfolio companies. They're not the growth initiatives that are staring them right in the face that they would be able to handle or that are more sensitive to growth, but they're a little bit more of that kind of blue ocean kind of idea. And so we train up those students, we bring them in, and then my partner Derek and I work with them alongside the CEOs of portfolio companies. We bring in some executive mentors from McKinsey and from Bain.

Sometimes we're exploring board members of these companies actually engaging. And so you've got investors, board members, alumni, executive mentors, and students all focused on creating more value and growth at these portfolio companies. And so, you know, these are not, these are not student led projects. These are not student presentations. I mean, they are coming in for a real almost, you know, private equity style kind of internship with us.

And so, you know, and that, and that looks at like something where our students did 900 outreaches on new markets for one of our portfolio companies that resulted in like a hundred interviews with potential customers, with suppliers that has generated, you know, meaningful opportunities where our portfolio companies have in part made decisions, capital allocation decisions, not as solely because of these, the work of, of what we've done with the students, but it has informed some, some of their decision making in a significant way to do that. And so, you know, the students are sitting across me as the majority interest of the company. They're not sitting across from. Yes, I am their professor, I am that. But, and so the, the level of value Creation we can do with those students is, is, is much more.

That said, they're students, you know, these are undergraduates that we're working with on these engagements. And so there's headwinds there. And you know, is there some time, you know, time wasted? Could I do this in a more efficient manner where we're providing some growth resources, you know, some shared services to our portfolio companies? Absolutely.

But our, our view is that this relationship is, can create value for us, it will create value for the portfolio companies. Our portfolio companies are getting internships students out of this engagement. And so you look out and this is not again, this is not today. But if we zoom ahead five years and we do two to three deals a year and all of a sudden there's 20 companies here in West Michigan, I mean we're gonna have our own career fair where we're gonna get the best talent there. And so this flywheel effect you can start to see.

And at the end of the day, our undergraduates then, who aren't, who aren't at Harvard, who aren't at Michigan, who aren't at Northwestern, can go into an interview and say, well, I work. I led a team of analysts on a growth strategy project for a private equity backed portfolio company. And when they say that line as an undergraduate, you can't say that line at almost any other school. And so it's a value driver for the university as well. And so these are how we've designed these two worlds to, you know, create mutual benefit and had to innovate to make, make those things work.

[01:11:17 - 01:12:07]

Will Smith: Let's close with a discussion of how this could be replicated in other markets. Does it even make sense? Let's start with say I wanted to do that in the Northern Virgin, do a sleeping giant in the Northern Virginia area. First of all, who should I be? Should I be a investor capital allocator or just an entrepreneur?

Maybe a searcher who would otherwise search for their own business. Who do you think a good Doug Lepisto would be? We've had these conversations with some family offices in other geographies that see the value of our model, that see the same dynamic happening in their community. And so you want one to engage with us in trying to develop this kind of model in another place. And so this, this question is, is top of mind.

[01:12:07 - 01:15:11]

Doug Lepisto: So you, the first thing is, is that re. That place would need the 5 el. 5 elements. It would need closely held businesses that need transition. Well, that's, that's happening everywhere.

You need local capital. It doesn't make sense for the coasts to invest in this. So you need people who care about place as, as, as investors. You would need a pipeline of aspiring owner operators. Might come from a business school, maybe it comes from a course like Acquire, but you're going to need that.

Sleeping Giant I think has been successful in part because of that connection to the university. I mean right now the three of the four CEOs in residents we have are Western Michigan University alum. You know, they basic, they, they came back after know, 20 years out professionally and have come, you know, come full circle. So you need a regional university and then the final piece is you need a, you need the Jeep, you need a gp, you need a, an entrepreneur, somebody to kind of spin up that model. Somebody, you know, like, like me or my partner Derek.

And so you know, those are the five elements that you need. And that's, there's a lot of places that have that. So how does one go about, about doing it? Where would they start first? I think it's somebody who needs to have really great relationships across a lot of different sectors that can pull something of this off.

I mean I am talking to professionals, I'm talking to businesses, I'm talking to investors, I'm talking to students, I'm talking to administrators, I'm talking to, you know, service providers. Somebody who's really good at creating those, those networks. And I think is, is really critical if you wanted to actually replicate what we're doing, you would need to be able to be both a professor or at least have a teaching function at a university as well as the, you know, the capital allocation and, and kind of business, you know, fund leadership as well. That doesn't need to be a tenured track faculty member. I mean we were joking about this at the beginning of our call.

There is really unrealized value in the fact that, you know, tenured track faculty, you know, the curriculum is the, the jurisdiction of the faculty. And so if you want to bring in this, this LBS teaching component we have for undergraduates, you need some way of engaging your curriculum. And we've explored ideas of how Western could be a part of that. But those are really some of the high level elements that you need to, to be able to start to pull all those, those stakeholders together. Yeah, let me press on the need the tie into Western Michigan University because while I, while I can see it's added tremendous value in Sleeping Giant, I, I worry that anybody who thinks your model is really cool and would love to replicate in their market if they don't have Some a similar tie in to a local university or there isn't a regional university there that they'll say oh this isn't for me.

[01:15:11 - 01:16:06]

Will Smith: And I wonder and I think it could be, I think it could be because those opportunities that you're providing your undergraduates while valued, while super valuable and to them and then also kind of helps create this long term flywheel. It doesn't seem actually to be required of the model necessarily is that fair? I think it's, it's, it depends on what your investors want to see. You know our investors, you know when we, we started this as professors and we still are professors and so when they saw the relationship and, and mutual benefit where they could get a great return and advance the university, they wanted that. And you know, you know the conversation I've had with you know, other family offices, it's for them it's like well that for them it would be essential but really it's the capital that decides.

[01:16:06 - 01:17:15]

Doug Lepisto: Right. And if you have investors that you know that's not a, a meaningful thing for them. You know that's not, not essential. Yeah. You know, I know that we have conversations and get leads because of our tie to the university and I could see that continuing.

There's a lot of business owners who are Western Michigan University alum that we can, we create good favor with you know, on the seller side in addition to the talent side. So. But not, but not essential. Wouldn't need to be done to, to have this place based approach. You know I think people would also though question.

It's like well what are you really doing? Kind of to the concessionary comment and impact common. It's like okay, great, great that you're buying all these companies but like what are you doing beyond that? You know, is there something else other value you're creating? You know, the social.

What's the double bottom line in a sleeping giant without a university? Yes. You're keeping capital and talent local. You know, you're, you're, you're, you're empowering entrepreneurs in your community and maybe that's, maybe that's enough but it's, it's really an investor capital. They're going to answer that question of what they want to see.

[01:17:16 - 01:17:43]

Will Smith: Well, certainly an association with universities have a sense of you know, they signal enduring, you know, permanence. They're, they're, they're really ingrained and they're, they're not going anywhere so that, that some of that juice rubs off on, on you if nothing else. Right. You get to, it gives you that sense of permanence, you could also imagine that somebody jump. Can I jump in there?

[01:17:43 - 01:19:01]

Doug Lepisto: So, I mean, there we have an aspiring. We have a gentleman named Mitch here that is there because of, you know, Derek and I started a little podcast back in the Pandemic and he was looking for something. He was, he was a Western grad and he saw. Because he's a Western grad. Well, now he's here.

And one of the port, one of this, another. The two gentlemen that we backed at, at Portland Products, they're here because our students reached out to them. So you know, and, and we've had aspiring owner operators find out about and come through a choir because they're the parents of our students. So yeah, in a, in a, in a, in a kind of a more narrow view, the university is a distraction. I mean, what do you got?

But in another sense, there's a lot of value and a big, a big tam of relationships and networks you get access to. Yeah, yeah, totally, totally. Well, you could imagine if somebody wanting to do this isn't already associated with a university or, or academ academic institution that they reach out and create an association. George Mason here, here in, in Fairfax. You could imagine approaching me approaching them and saying, you know, here's a model I'm trying to spin up.

[01:19:01 - 01:19:25]

Will Smith: Would love to connect with your business school or, or your business students on this and figure. I, I don't know if universities are work with outsiders. Maybe they only want to work with their own alum, but you could, you could, you could approach it that way. No, you, you, you, you could. I can tell you from experience, working with universities as outsiders, even if you are an insider, is very challenging.

[01:19:25 - 01:20:46]

Doug Lepisto: Okay, These are, these are slow. I mean, so the criticism of, of higher ed having too much inertia and being too bureaucratic is true. And so how you work with an entity like that takes some, some take some finessing, let's say, and some persistence, but could be done. And, and you know, for me, I, I just love, I mean whether Sleeping Giant gets, goes to another community or somebody's inspired by this podcast to start it in their own place. And whether Sleeping Johnny, my Sleeping Giant monetizes or not, to me the, the, the value is I think we're doing a lot of good and we're impacting a lot of people and a lot of really positive way and we're, we're making great money and I just hope that to see the full potential of the model, you know, get, get express where other communities can, can benefit from it.

Like, you know, I think West Michigan hopefully is. Great. Let's, let's call it there. Doug, anything that we didn't touch on that you wanted to share with the audience? No, I think that was great.

That was fun. Super, super. The URL people can Google it, but just give it to us for Sleeping Giant. It's just sleeping giant capital.com sleeping giant. Capital.Com will provide a link to that.

[01:20:46 - 01:21:18]

Will Smith: We'll provide a link to your LinkedIn. Is that how you prefer people reach out or email also? LinkedIn's great. LinkedIn. Okay.

Linked is great. Okay, super. We'll do that. Fascinating. Doug, really, I really love the, the, the model.

I love the long termism of the model. I love the, the entrepreneurialism of the model that, you know, your innovation on some of the models that are already out there. It's. Yeah. So it's really, it's great.

Thank you for coming on, Doug. Appreciate it. Lepisto. That's very good. That's a lot of fun.

[01:21:18 - 01:21:41]

Doug Lepisto: Thank you Will. Hope you enjoyed that interview. Don't forget to subscribe to the Acquiring Minds newsletter. We send an email for every every episode with an introduction to the interview, a link to the video version on YouTube and soon key takeaways, numbers and more essentials from the interview. For those of you who don't have time to listen or watch it, subscribe.

[01:21:41 - 01:22:06]

Will Smith: At Acquiring Minds Co. You'll also find all our webinars there on the website. Both those we have coming up and. Recordings of past webinars. At this point, There are over 30 webinar recordings, a wealth of information on all the technical nitty gritty of buying a business. Acquiring Minds copy.