Maverick on Main Street

Posted on Dec 1, 2009 :: Cover Story
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Posted by , Insight on Business Staff Writer

Todd Thiel, McKinley Reserve

Sitting in his second floor office, surrounded by dark floral print wallcovering and damask drapes, dressed in a tailored business suit, Todd Thiel is a study in contrasts. Here, he looks
exactly like the Manhattan investment broker he was for the better part of a decade at Shearson Lehman Brothers and Salomon Smith Barney. Open the drapes and Thiel’s office looks out, not over Park Avenue, but over a small park at the corner of Fifth and Main in Hilbert, Wis., population 1,089. About every 15 minutes or so, a car (or more likely a pickup truck) drives by. Outside the restored 100-year-old bank building that houses his business, Thiel himself is more likely to look like the rural Hilbert farm kid he was for 18 years before heading off to college and a big-city life in high finance.

Thiel runs his international investment firm, McKinley Reserve, from his hometown, backing businesses as diverse as a regional wireless company and a honey farm. He could live anywhere in the world, but he is proof positive that you can make money – and make an impact – from anywhere today, with global street smarts and an Internet connection.

With the financial muscle to pull off real estate investment deals in the Middle East, Thiel’s preferred focus these days is on Wisconsin companies. He risked taking a billion-dollar bath in Dubai and says he’d go back for more if the timing was right, but one of his proudest investments is backing some beekeepers in Chilton. The founder, president and CEO of McKinley Reserve, Thiel sees no conflict in any of this. He says he had “a wonderful love affair” with New York City, where he took up residence in 1993 as a 22-year-old budding investment broker. Still, when Thiel left Salomon Smith Barney in 2001 and moved back to Calumet County to launch his own investment firm, it was a natural progression.

“I never could get comfortable with the lifestyle in New York, although I loved the city,” says Thiel. “I could never get comfortable not having land and space and breathing room, so I knew I was going to make my way back here. I’m the son of a farmer. You can take the farmer away from the farm, but you can’t take the farm out of the psyche.”

Some who have worked with Thiel might argue that you can take the man out of Manhattan, but you can’t take Manhattan out of the man. Thiel says he always had an edgy personality, and he doesn’t dispute that his aggressive business style sometimes “ruffles some feathers” in the laid-back Midwest.

“I sometimes find myself being exceptionally aggressive, maybe more so than before I left,” says Thiel. “I can see where we need to be, so I’m just simply going from A to B in the shortest period of time. Unfortunately, as many business owners know, that ruffles some feathers if you do it too aggressively. I’ve learned that you have to be very inclusive and try to inform people as much as possible, because otherwise you’re just viewed as a bull in a china shop. I had to take a big step back and say, ‘It’s just going to take time to let them know what my vision is.’ I’m not so sure that I’m good at it, but I’m working on it.”

Others say his audacity is a welcome departure from Midwestern constraint.

“I would agree that Todd is more aggressive than the average Midwesterner, but to some degree I think that’s helpful,” says Steve Schneider, president and CEO of Green Bay-based Hilbert Communications. “Sometimes we’ve been a little too humble in the Midwest.”

Schneider’s firm was the beneficiary of McKinley Reserve’s investment backing, to the tune of more than $23 million committed through a private stock offering.

Chilton-based Wisconsin Natural Acres was doing well as a regional honey producer before Thiel came along, but co-owners Doug Schulz and Lee Bjork never envisioned much beyond that. For them, Thiel’s ambitious vision was a blessing.

“Todd has such an infectious entrepreneurial spirit and will,” says Bjork. “He said to us, ‘Don’t you guys realize what you have here?’ He saw the bigger picture and pushed us to the next level. He instilled in us the confidence to get our story out and not be shy about it.”

With McKinley Reserve’s backing, Wisconsin Natural Acres now has national distribution, a world-class website and has been featured in Heavy Table magazine, on CNBC and on the Food Network. “We’ve gotten orders from every state and even some from overseas. It’s been pretty unique for us,” says Bjork. “Until Todd came along, we didn’t really know what we were capable of.”

LIVE LOCALLY, WORK GLOBALLY
Technologically, there’s virtually no difference between doing business in Hilbert or in New York, says Thiel, whose company also has offices in New York, California, Milwaukee and other locations.

“When I decided to move back to Wisconsin, people asked me why in the world I was going back to Hilbert. I would tell them that it’s calm, clean, quiet and discreet and that’s just the way I like it,” says Thiel. “You can think in this environment. It’s very different from an aesthetic point of view, but it is identical to the way we conduct business in a large city. You step in this room and it’s Manhattan. You step out the door and you’re in the great Midwest and I love it.”

Thiel knew he was destined to work in the financial world since he was in grade school. Though he loved growing up on the dairy farm outside of Hilbert, the ninth among Donald and Lois Thiel’s 12 children, he had an early insight that farming was not in his future.

“I remember riding on the hay wagon on a hot summer day, bailing hay and thinking, ‘There has to be a better way to make a living,’” Thiel says.

When he went off to St. Norbert College in 1988, it was already a given that Thiel would major in business. After graduation in 1991, Thiel headed off to Marquette University to get his MBA. In the process, he also began his investment banking career, starting as an intern in the Milwaukee office of Shearson Lehman Brothers and moving to the firm’s New York office in 1993.

In the beginning, Thiel worked the phones and focused mostly on personal investment, but as his business clientele grew, so did his opportunity to expand his reach, helping put together stock offerings or raising equity capital for his clients’ companies.

By 1999, Thiel knew he would leave Salomon Smith Barney. He put his exit strategy in motion by migrating back to Milwaukee to work out of that office, then to Green Bay and Appleton. In the meantime, he bought a house in Sherwood (which Thiel calls “the greater Hilbert area”), married Jane Gehl, who he’d known since high school, and bought the former State Bank of Hilbert building, a historic structure on Hilbert’s Main Street.

With a colleague in New York and another in California and “several million dollars worth of client money,” Thiel developed three investment funds – a real estate investment fund, another to provide private equity capital for companies and a hedge fund to invest in publicly traded securities. McKinley Reserve, Thiel says, “was born out of the fact that I could see these three funds interacting with one another. It happened very organically and naturally and we decided to make it more formal.”

GOODBYE DUBAI
Thiel’s biggest overseas investment project was a proposed $1 billion real estate development in Dubai through McKinley Reserve’s Capital Partners subsidiary. When the project was announced in 2005, Capital Partners was the first U.S. company to obtain freehold ownership in Dubai, and its 38-acre Riverwalk project represented the largest proposed foreign investment in Dubai at that time.

By 2007, however, Thiel’s group was in a dispute with its contractual partner, Tecom Investments, over ownership of the development site. At that time, Thiel’s investors had about $10 million committed to the project. Capital Partners eventually sued Tecom for $1 billion, and the legal dispute is now being decided by an independent arbitration panel. That panel has reportedly already decided in favor of Capital Partners in the liability phase of the case, but has made no decision on damages to be awarded.

The Dubai experience is part of the reason Thiel says his preferred focus these days is closer to home, but he’s quick to add that it was a valuable learning opportunity.

“It broadened our horizons and it expanded our reach – our influence, if you will,” says Thiel. “With what we know now, we would do it again if the right opportunity presented itself, and we learned enough to do it better next time. We always like to swing for the fences on one or two projects, but we’ve found plenty of opportunities here in the United States. I’m becoming very Wisconsin centric, very Northeast Wisconsin centric.”

Besides Hilbert Communications and Wisconsin Natural Acres, Thiel has backed a number of Wisconsin companies, including ENCAP, Coating Excellence, Berres Brothers Coffee Roasters, Green Bay Decking and Lesaffre Yeast Corporation.

Molly Jahn, who just began a term as deputy undersecretary at the U.S. Department of Agriculture, says entrepreneurs like Thiel are needed to revitalize rural areas.

“It’s exciting that the likes of Todd do come back and bring their talents and insights about all the opportunity out there right back to places like Hilbert,” says Jahn, who worked with Thiel during her tenure as dean of the University of Wisconsin College of Agriculture and Life Sciences. “We both saw the potential in rural Wisconsin for growth and prosperity.”

Thiel says his favored projects are technology-driven and based in a rural environment – companies that are at least three years old and generating $5 million to $10 million, with opportunity for growth and a need for capital to fuel that growth. McKinley Reserve provides equity investment, along with consultation.

“We have to be involved if we’re going to put capital into an entity,” says Thiel. “We don’t want to run the company, but we want the management to have all the tools we have access to at their disposal.”

Schneider says Thiel’s contribution to Hilbert Communications went beyond the financial.

“McKinley Reserve was very helpful in getting our vision aligned with our investors and developing a business strategy for long-term growth,” says Schneider. “Todd really had to dig into our business to understand how we operate and he’s also provided constructive oversight without being overbearing.”

HELLO HILBERT
Aside from the business aspects, Thiel likes being where he is because it’s where he wants to be. “The quality of life is amazing,” says Thiel. “I drive my kids to school every morning. Their school is three blocks away from my office. I drive past the family farm on the way to the office and on the way home and stop in several times a week just to say hello to my Mom and Dad, who are still working the farm. That’s important to me.”

Marty Magida, managing director of Carter, Morse & Mathias, a Connecticut-based investment bank, says he’s not surprised that Thiel can make a global investment firm work in rural America.

“In investment, there are times when there’s no substitute for pressing the flesh at some point in the process, but you can move a project pretty far down the pike through technology and communications, wherever you are,” says Magida, who has collaborated with Thiel on several projects. “There’s also the case for being close to the ground with regional companies. His proximity and familiarity with the region helps in that regard and we can also bring something to the table, because sometimes there’s a need for capital beyond local resources.”

Rollie Stephenson, president and CEO of Faith Technologies and a Hilbert Communications board member, says he appreciates Thiel’s blend of small-town ethos and urban audacity.

“I’ve heard it said that Todd rubs some people the wrong way, though I’ve never experienced it myself,” says Stephenson. “That’s what happens sometimes with get-it-done people. Sometimes you have to try to slow down, but it’s hard for people like Todd to do that. He’s a big thinker, he’s very energetic and he’s committed to getting things done. Ultimately, people like Todd get measured by the results they produce, and at the end of the day if you make money for people, you’re a hero.”