Doug Lepisto·September 11, 2025

The Flywheel of Buying Businesses in a Single Region | Doug Lepisto Interview

Doug Lepisto is a business professor at Western Michigan University who co-founded Sleeping Giant Capital with fellow professor Derek MacIver as a place-based, long-term hold alternative to traditional private equity focused entirely on West Michigan. Rather than targeting the freshly-minted MBA searcher profile of traditional search funds, Sleeping Giant backs mid-career professionals (typically 30-45, often post-MBA) already rooted in the region who want entrepreneurial ownership without relocating. The fund targets enduringly profitable, boring businesses in the $2-5M EBITDA range — manufacturing, value-add distribution, technical services — that are too large for SBA but too small or regionally specific for institutional PE, typically run by retiring baby boomers who do not want their companies flipped in 3-5 years. Fund I was $34.5M; by the episode's air date the portfolio comprised seven acquisitions representing $90-100M in revenue and ~300 employees, with a larger Fund II coming to market. Lepisto's central thesis is that place-based commitment creates compounding advantages: off-market deal flow from sellers who distrust PE, local referral networks, a pipeline of community-tied operators, and a university partnership that deploys student teams as low-cost growth-strategy researchers for portfolio companies — together forming a regional flywheel that a geographically agnostic fund cannot replicate.

Deal facts

sde ebitda: approximately $2-5 million EBITDA per acquisition (portfolio average ~$4-5m EBITDA)
revenue: $90-100 million total portfolio revenue across 7 acquisitions
financing structure: committed fund capital (Fund I: $34.5 million); no SBA — deals are too large for SBA
notes: Seven acquisitions closed by time of airing; Fund I was $34.5M with additional side cars; Fund II announced as larger; target deal size is $2-5M EBITDA, 50-100 employees; businesses 30-75 years old typical

Why this business

Lepisto and co-founder Derek MacIver identified the silver tsunami of baby boomer business owners retiring in West Michigan, combined with a gap in the market: sellers who did not want to sell to traditional private equity and have their companies flipped in 3-5 years. They wanted to create a place-based, long-term hold alternative to PE that would also serve as a living laboratory for experiential business education at Western Michigan University.

What's working

Place-based reputation in West Michigan generates off-market deal flow — sellers who distrust PE actively seek out Sleeping Giant because of its community-rooted, long-term philosophy
Local relationships with banks, brokers, and service providers create a referral network that consistently surfaces opportunities that out-of-region buyers never see
The 'Acquire' 8-week one-on-one coaching course with Derek MacIver doubles as deep diligence on prospective searchers, building trust before any capital is deployed
University partnership with Western Michigan University provides student labor for growth strategy projects (market research, new geography outreach) at portfolio companies at low cost
Long-term hold mandate aligns well with family office and HNW local capital that is tired of 3-5 year PE cycles; raised Fund I of $34.5M and announced a larger Fund II
West Michigan's high density of retiring baby-boomer-owned businesses (5,759 in Southwest Michigan alone, 13 billion in sales, 72,000 employees) means more deal flow than searchers to deploy
Operator economics are competitive: 10-10-10 equity structure (10% at close, 10% vesting over 4 years, 10% performance) versus the 8.33% tranches typical of traditional search funds

What's hard

Institutional investors (fund-of-funds, etc.) initially laughed at the model — first-time fund, place-based TAM ceiling, university tie-in seen as distractions, making early fundraising painful
The TAM is constrained by geography and is also temporal — the baby boomer transition will eventually end, putting a ceiling on both deal count and time horizon
Bottleneck today is qualified searchers/aspiring owner operators, not deal flow — harder to find great people willing to commit to West Michigan long-term than it is to find businesses to buy
University partnership, while valuable, is slow and bureaucratic — working with academic institutions as an outsider (or even insider) requires significant finessing and persistence
Articulating what Sleeping Giant is — a hybrid of search fund accelerator, committed capital vehicle, long-term holdco, and university practicum partner — is difficult; the model resists easy categorization
IRR-based incentive structures don't fit a long-term hold model well; the team is still innovating on performance metrics (shifting toward DPI/cash-back rather than IRR) for the final 10% equity tranche

Notable quotes

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 3 to 5 years. And so we, with this place-based focus, we realized that, okay, well, we can access opportunities that traditional private equity wouldn't.

In Southwest Michigan — and so that's not broadly what this is, not including Grand Rapids — there's 5,759 baby boom owned businesses that employ 72,000 people and 13 billion in sales.

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.

The answer is trust. You know, the — could we buy up 20, 30 West Michigan businesses and then sell them to the coast? That would be the end of Sleeping Giant. And I think 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.