Rocket Man

Posted on Dec 1, 2015 :: Cover Story
Margaret LeBrun
Posted by , Insight on Business Staff Writer

 coverstoryinstoryphotoAl Zeise knew he had it figured out.

He and his team at ZyQuest had developed software for oil companies to report their excise tax electronically — something many states and the federal government would require oil companies to do in the late 1990s.

He proved their solution, Zytax, worked for every fuel company in Wisconsin as well as Arkansas and Nebraska.

They were gearing up to provide a 50-state solution when he scored an audience with Arthur Andersen, which was looking for a way for its clients, including BP, Cargill, Amoco and Penzoil, to do the same thing. Coming from “little old Green Bay, Wisconsin,” as he likes to say, Zeise realized he was up against a Goliath.

“They had spent about $3 million to $5 million to develop their system, but when they met with us they just realized we were so far ahead of them that they threw away everything they did,” Zeise recalls. “We saved their bacon. That gave us instant credibility in the industry, and from there it was a cakewalk. That was our first successful launch.”

Next came licensing with Texaco and Shell.

“To win completely, for a little company, that was pretty big,” Zeise says. “From Green Bay?” He blows a Bronx cheer.

“I love being underestimated,” he says, proud of his two-year degree in data processing from Northeast Wisconsin Technical College in 1980. “I love competing. In whatever we do, we win.”

Helping ideas take flight

cover_slideZyQuest, a technology consulting and software development company that Zeise started in 1994 in De Pere, sold Zytax in 2001. Its legacy has since come back in the form of a new, improved company Zeise helped create in 2013 with U.S. Oil, a division of Appleton-based U.S. Venture. Led by the original development team, including Al’s brother, Dan, IGenFuels is poised for exponential growth on its own.

Zeise’s brilliance, energy and smart money can be directly traced to the launch and skyrocketing success of several companies launched in Northeast Wisconsin, which also include Breakthrough Fuel, Aver Inc. and Zymo Interactive.

His passion for identifying great ideas and helping people solve them — by bringing his understanding of technology and the right people to the table — is precisely the sort of stuff we need to turn the region’s economy into a hotbed for innovation, angel investors and entrepreneurs, community leaders say.

“Al Zeise has obviously accomplished a lot,” says Paul Jones, an angel investor and chair of the Venture Best group at Michael Best & Friedrich focused on emerging technology entrepreneurs and investors. “He’s a critical part of the Green Bay area.  … He is on the cusp of doing some great things.”

Recognizing that his model for helping ideas grow into viable business ventures would be a win on many levels, in early 2015 Zeise convened a group of 11 individuals, each from different industries but all with a depth of experience, and formed ZyQuest Ventures Foundry (see accompanying list of members on p. 27), called “the foundry” for short.

“What the foundry is trying to do is commercialize the model of how we’ve created companies over the years within the industries we work in: health care, transportation, communications, banking, manufacturing and others,” Zeise says. “We use those organizations to mine those industries to find problems to solve and do it in a way where we commercialize it and actually create new companies.”

He calls what they do “pre-angel investing,” because it involves ideation time and helping to shape solutions using the subject matter expertise of the foundry members.

Jill Enos, managing director of ZyQuest Ventures Foundry, serves as the point person for pulling in the appropriate foundry members and other experts to help entrepreneurs or companies tackle ideas or solve problems. Once a plan is mapped out for how the idea can become a money-making venture, foundry members invest.

The foundry co-sponsored the first Launch Wisconsin event hosted by ZyQuest at the Lambeau Field Atrium in October, attended by almost 400. Event promotions pointed out Wisconsin ranks “dead last” for new business startups nationwide, according to the Kauffman Foundation, but that great potential exists to change that.

Enos says the goal of Launch Wisconsin was to gather corporate innovators, entrepreneurs and investors so they might work together to identify opportunities they wouldn’t otherwise have. A well-attended segment of the day involved “reverse pitches” from chief innovation officers at companies in the region describing their businesses and the potential for harnessing new ideas from entrepreneurs, including Jewelers Mutual, Foth, Harley-Davidson, American Family Ventures, Appvion, Assurant and Bay Tek Games.

“Al didn’t want it to be a ZyQuest event, he wanted it to be a community event,” says Enos, a Harvard MBA with experience launching startups. “He wanted it to be an event where you can see there are really talented people and ideas and capital right here in our own backyard.”

Breakthrough Fuel: Birth of a shipping solution

Several members of ZyQuest Ventures Foundry spoke at the day-long Launch Wisconsin event, including Craig Dickman, CEO and chief innovation officer of Green Bay-based Breakthrough Fuel, founded in 2004. Dickman went to high school with Zeise at Green Bay Southwest, and after hearing of the success his friend had with Zytax, approached him in 2005 to help improve upon the way Breakthrough helps shipping companies save money on fuel.

Zeise immediately saw Dickman’s idea as a “no brainer” and became an investor, putting his team of ZyQuest programmers to work. They identified a large shipper, Georgia Pacific, with a keen interest in the project and tapped that company to help fine tune the approach. That strategy — partnering early with a company interested in applying the specific idea or solution that can bring its subject matter expertise — has been a theme among Zeise’s successes.

Breakthrough Fuel saves shippers money by figuring out the exact cost of fuel for transporting a load from one point to another, offering alternative routes, fuel types and shipping methods to help a company be more fuel efficient. Since the company was launched, Breakthrough has added marine fuel to its surface truck and rail customers. It has saved its clients about $1 billion in fuel costs and now operates in 42 countries.

“Al is truly one of the most selfless people when it comes to his time and knowledge; he has a genuine interest in helping others succeed,” Dickman says. “The foundry wouldn’t exist without Al, Launch Wisconsin wouldn’t have happened without Al’s drive. This is something he gets personal energy from.”

Aver: The launch that got away

Zeise met Kurt Brenkus in 2010, about the time the then 29-year-old former St. Norbert College philosophy major was looking to start a company that would take on the health insurance claims reimbursement system. Brenkus (who left SNC before earning his degree) came with extensive experience in health insurance claims auditing, having worked as chief of staff for global and domestic provider operations for United Health Care and for a claims audit organization in Florida.

“I knew Al was an innovator guy and had worked with other companies in the nascent stages, so we went to lunch,” Brenkus recalls. “I said, ‘I’m going to create some software that is going to change how reimbursement is done.’ Al is pretty passionate about health care, so he said, ‘Yeah, it’s all messed up!  Someone’s got to fix it!”

Zeise mentored Brenkus and invested $175,000.  Brenkus and his business partner Matt Frohliger founded Aver Inc.

With the advent of the Affordable Care Act, they saw the opportunity to create an intuitive software platform to build bundled payments and analyze performance that anyone across the health care industry can use. In a nutshell, the software analyzes the myriad codes in the fee-for-service system and, by looking at the period of time involved, identifies them as specific episodes of care — such as knee replacement, pregnancy, heart operation, etc. It then generates a bill with one flat price, saving potentially millions of dollars in health insurance claims annually. Aver is one of just a handful of companies in the country that offer such software to automate bundled payments. 

Early on, Aver raised several rounds of $1 million in funding from angel investors and was able to quickly grow its revenue to $2.6 million. Then, GE Ventures and Drive Capital invested $8.5 million. In mid-2014, Brenkus moved the company and his 10 employees from Green Bay to Columbus, Ohio, where Mark Kvamme of Drive Capital was based. (Kvamme was also a partner in Sequoia Capital, an original investor in Google and LinkedIn). It was also where he was able to hire data scientists, which he describes as “a cross between a statistician, programmer and someone who can interpret the data.”

Aver now employs more than 60 and is on track to earn “tens of millions of dollars” annually, Brenkus says. His goal? He laughs when he says it, but is dead serious: To help the $3.8 trillion health care industry save at least $1 trillion a year.

Zeise and other local investors were disappointed to see Aver leave — but they understood his decision.

“It’s not what we want to do, we want to help create companies and keep them here,” Zeise says. “But it actually was very good for them.”

During an address to the St. Norbert CEO Breakfast & Strategy Series in October, Brenkus said although it was a good business move, he “regrets leaving Green Bay” because of the impact he could be making on the community. He returns often and always meets with Zeise.

“Aver wouldn’t exist without Al,” Brenkus says. “He’s got this uncanny ability to understand the technology and the implications for business and the ability to do both very effectively. He connected us to developer talent, he connected us to his network of people to push along sales in the very early days and he provided strategic guidance about the way we wanted to position the company. He’s a true risk taker.”

Zymo: Transformation of a video game company

Adam Larson was the seventh employee to join Frozen Codebase, a video game development company launched in 2005 with the help of the NEW Capital Fund, a Northeast Wisconsin investment group. They had developed a few games but the Great Recession hobbled its success. Its president, Ben Geisler, left in 2011 and took a job as an instructor at the University of Wisconsin-Green Bay.

Enter Al Zeise.

“Al recognized the talent and he wanted to keep us together,” says Larson, who now leads the group. Zeise moved them to the ZyQuest office and hired them to work on a project involving mobile video games that tied wins to small donations for charity. One game was downloaded 1.6 million times.

But soon, Zeise realized that charitable organizations didn’t want to receive donations made from what was, essentially, gambling. He helped the team take their talents and create a new business model, blending video game technology with the business world. In 2013, Zymo Interactive was formed to create 3-D animation, catering to the packaging industry. Package designers can show their clients how their final products will look from all sides.

Recently, the team of 14 moved into the Mainstreet Commons building in downtown Green Bay. ZyQuest Ventures, Bay Tek Games, Larson and another employee own the company. They hope to reach $1.5 million in revenue by the end of 2016.

“Al is one of the smartest people I’ve ever met,” Larson says. “He thinks in ways that really stretch you.”

IGenFuels: Coming full circle

Zytax handled more than 66 percent of all taxable transactions involving fuel sales in the U.S. before the company was sold to FuelQuest in 2001. But in the years after the sale, Zeise heard from former clients that the product he developed had changed — it was no longer as flexible or adaptable as it once was. It had been sold twice, most recently to Avalara Inc.

He tapped the original development team for Zytax, including his brother, Dan (who was working on other projects for ZyQuest, including Aver), Bob Badeau and Steve Smith. A retired U.S. Naval officer with a master’s in petroleum management (who for five years ran the largest fuel terminal in the continental U.S. at Norfolk, Va.), Dan began working with Al and others at ZyQuest to develop a product that would compete head-on with the one they originally created.

About the same time, Pittier Martinez, director of taxation at U.S. Oil, complained to CEO John Schmidt that the company was stymied in its plans to expand nationally because of the limitations of its electronic software for tax reporting. In 2013, U.S. Oil provided fuel in 12 states, with 80 percent of its sales in Wisconsin.

“John Schmidt said, ‘Let me introduce you to Al Zeise,’” Martinez recalls. “They’re good friends. It was a lovely coincidence. …  IGenFuels has been the answer to our prayers.”

Dan and Al Zeise and the ZyQuest team partnered with U.S. Oil and worked closely with Martinez to develop a new electronic excise tax reporting system for U.S. Oil in 2013. With the new system, IGenFuels, they now serve 44 states, the District of Columbia, Ontario and Quebec. Martinez expects they’ll serve all 50 states by the end of 2016.

Dan oversees 18 employees as director of operations at IGenFuels, a standalone company in which U.S. Venture is a majority investor; ZyQuest Ventures, and Dan Zeise, Badeau and Smith are also owners. The company expects to hire another 10 people in 2016 and revenues to grow to $40 million by 2018.

HuTerra: Online fund-raising solutions

Lately, Zeise has been all-in with his latest project, an online fundraising solution called HuTerra. A for-profit whose mission is to enhance the revenue streams of nonprofits through cause-based rewards programs, it aims to streamline the fundraising activities of schools and youth programs.

In addition, ZyQuest launched the nonprofit HuTerra Foundation. It has uploaded every charity registered with the IRS, as well as clubs, schools and faith-based organizations. It offers a way for nonprofits to easily invite people to raise money, whether it includes product sales or direct donations.

“We created facilities that automate the whole thing,” Zeise explains. “Kids don’t have to go door-to-door, all they have to do is send out emails about it, tweet about it, post on Facebook and sell the products. We negotiate with the vendors, and we earn money off the vendor side because we automate it and make it easier for them. Kids don’t touch the money anymore, it’s all transparent; it’s all trackable.”

Unlike conventional crowdfunding websites, which keep a hefty 10 to 20 percent or more, the HuTerra Foundation keeps 3 to 5 percent on donations to cover transactional fees and provides event management, donor management, volunteer management and website development.

As of October, it had raised more than $5 million for nonprofits. Habitat for Humanity was an early adopter and uses it to raise money in 26 states. If every Habitat for Humanity chapter used it, Zeise estimates it could save as much as $15 million to $20 million per year on software, website development and surcharges related to fees.

Scoring success in ‘touchdown’ country

Zeise has come a long way since he began his career as director of IT for H.C. Prange in the 1980s. He worked long hours and learned the value of never repeating the same mistake.

“I consider myself a developer, not a technology person,” he says. “I think of technology as a means to an end, not the end. It becomes a self-preservation thing. If you get a call in the middle of the night and you have to solve a problem, you can do the easy thing, which is fix the system — but then you’re going to get called again the next night. The goal is, if you take the time to solve the problem, you generally solve it permanently.”

When Prange was bought in 1992 by Younkers, the much larger company embraced the technology Zeise had developed and also introduced him to new contacts at large retailers, including East Coast department store giant Boscov’s. Working independently from Green Bay, he developed a solution for shipping and tracking furniture for Boscov’s.

That’s also when he launched ZyQuest as an IT staffing company. During that time, he worked — and billed — a staggering 100 to 120 hours per week, sleeping about two hours per night over the course of 18 months, including weekends and holidays. (He now works about 60 hours per week.)

Though many call him a risk taker, he is very calculated in every project and has seen considerable success. With Zytax, Breakthrough Fuel and Aver Inc., “each one has returned 10 times or more on my investment,” he says. “Of the companies we start, none have failed.”

Because his own company and those who he has helped start are private entities, he won’t divulge his income or revenues. He laughs and says, “I’m not a billionaire. I don’t consider myself ‘arriving,’ and I can’t even think about retiring. Why would anybody want to retire?”

His passion is growing businesses in Northeast Wisconsin.

“I believe Northeast Wisconsin is a special place,” he says. “There’s a long history of innovation here. The nice thing about technology is you can do it anywhere, anytime. You don’t have to be in Silicon Valley to create technology.

“And there’s a lot of talent here. We’ve got a strong work ethic in Northeast Wisconsin — people who understand what it means to actually create professional solutions and solve problems.

“Our goal is to build on that more here. Instead of being flyover country, we want to be touchdown country!”

Margaret LeBrun

About Margaret LeBrun

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