KALAMAZOO — The Western Michigan University management professors behind an investment fund that looks to cultivate and support a new generation of entrepreneurs hope to complete fundraising by the end of 2021.
Sleeping Giant Capital LLC recently closed on $21 million raised from investors toward a $50 million goal for the Sleeping Giant Capital Principled Impact Fund I LLC that will back entrepreneurs trained at WMU who want to buy and run their own company.
The fund is gaining awareness as fundraising continues to secure additional investors, Managing Partner Doug Lepisto said.
“I feel good. We’ve had a positive start on our fundraising,” Lepisto said. “There’s a lot of promising conversations that we’re having and I think there’s real enthusiasm from the business community, Western (Michigan University), alumni, and sellers around our model. We’ve made a lot of progress and (there’s) a lot still to do.”
Lepisto formed Sleeping Giant Capital in the summer of 2020 with Derrick McIver. Both are associate professors of management at WMU’s Haworth College of Business and co-directors at the university’s Center for Principled Leadership and Business Strategy.
Fundraising has progressed as planned despite starting in the “very uncertain environment” of the COVID-19 pandemic, Lepisto said. The social impact aspect and the fund’s unique focus have been a selling point that’s drawn interest from prospective investors who are increasingly looking for more than a financial return, according to the founders.
“Whether it’s sellers, investors, alumni, business executives or community partners, we have been amazed by the enthusiasm for the innovative and purpose-driven approach of this fund,” McIver said. “Investors today require both attractive returns and true social impact. We see these two elements of our approach as mutually reinforcing. This first close demonstrates investor confidence in our vision and ability to execute.”
Sleeping Giant Capital Principled Impact Fund targets equity investments toward small businesses primarily based in West Michigan and generally with $1 million to $10 million in annual revenue, although “we have looked at things that are lower, (and) we have looked at things that are bigger,” Lepisto said.
The fund operates with a purpose beyond generating financial returns. Investments will support prospective owner/operators who go through an eight-week program, known as Acquire, that the Haworth College of Business launched last fall. Acquire trains WMU masters of business administration students and experienced business professionals to become owner/operators.
Acquire graduates can apply to go through a process where they are offered data, resources and connections to search for a company to buy and run. They can then qualify for financing through Sleeping Giant Capital to finance an acquisition.
Sleeping Giant executives say both the fund and Acquire have received strong interest since they were formed. Acquire’s inaugural cohort earlier this year was sold out, and the program has a list of 40 to 50 people who are interested in participating in the next cohort planned for this fall.
The fund also recently made its first investment — in Chicago-based industrial sales company LineDrive, which was acquired by WMU alumnus Michael Abdella — after looking at more than a hundred prospects. Lepisto expects the fund to close one more deal in 2021.
Sleeping Giant Capital will probably make two or three investments a year, he said. The partners will direct investments primarily toward companies based in West Michigan with up to 20 percent of the investments going to firms outside of the region.
“Whenever there is an opportunity for the investment to increase in value through bringing it to West Michigan and we can create more jobs and activity here, we would always be interested in that option,” Lepisto said.
Sleeping Giant Capital Principled Impact Fund I has attracted investors who are high net worth individuals and from family offices, and has received “interest in conversations” from foundations and other institutional investors, Lepisto said.
The fund has a long-term focus and could hold companies for several years, perhaps indefinitely, with the owner/operator ideally buying out Sleeping Giant Capital’s position.
Volatility in the stock market, low interest rates and the emerging risk of inflation plays into Sleeping Giant’s favor as the fund seeks additional investors through 2021 who have interest in an alternative investment option.
“We’re definitely a different asset class and our long-term focus and patient focus is something that folks are interested in,” Lepisto said.