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Tony Hsieh Makes Strides with Vegas Downtown Project

With 20 start-up investments and nearly 30 acres of land, Zappos CEO Tony Hsieh is slowly, but surely, fulfilling his promise to revitalize downtown Las Vegas.
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When Inc. last checked in with the Downtown Project, Zappos CEO Tony Hsieh's plan to revitalize Downtown Las Vegas, some Vegas natives were skeptical. At the time, local lawyer and restaurant critic John Curtas told Inc., "Some part of me doesn't trust what he's doing yet." He added: "As much as I'm afraid Zappos is going to Disney-fy the area, it's got nowhere to go but up."

So 18 months later, has it?

These days, Curtas is singing a slightly more optimistic tune. "Things are pointing in the right direction," he says of the project's ability to breathe life into a chronically-depressed downtown Vegas. "I think it's a couple years away from being there, but for the first time in 25 years, I have hope."

What's Happening in Downtown Vegas?

The grand vision for the Downtown Project began back in 2010, when Hsieh decided to relocate Zappos's headquarters to the City Hall building in Downtown Las Vegas (from the burbs), a move that will be completed this fall. Along with the move, Hsieh committed $350 million of his own money to invest in his new neighborhood, devoting $200 million to investments in real estate, $50 million to small businesses, $50 million to education and culture, and the remaining $50 million to tech start-ups through the VegasTechFund.

In just the last year, Hsieh has made quick work of that money. According to the Las Vegas Sun, Downtown Project has dumped $93 million into the purchase of 28 acres of land across Clark County. In late March, Downtown Project inked a deal to purchase 100 Tesla Model S electric cars for Hsieh's car and bike-sharing initiative Project 100. Meanwhile, several projects are still to come. This summer, the 150-seat performance space, the Inspire Theater, is set to open, followed by Downtown Container Park, an outdoor mall of sorts made of repurposed shipping containers, which will open this October.

"One of our goals is to have everything you need to live, work, and play within walking distance," says Hsieh via email. "In an ideal world, we'd like to help people get rid of their cars."

The Biggest Winners So Far

The primary beneficiaries of Hsieh's investment have been the founders of VegasTechFund's 20 portfolio companies, including start-ups like Wildfang, an e-commerce clothing company, and Skillshare, a platform for taking classes online. For many of these founders, including Maren Kate Donovan, CEO of Zirtual, Hsieh's offer was too good to pass up. Having grown up in Las Vegas, Donovan always believed that in order to get her entrepreneurial career off the ground, she'd need to get out of Nevada. So, after graduating college, she moved to San Francisco to launch her start-up, which connects executives to virtual assistants all around the world, in 2011. "It seemed to me that San Francisco was like Los Angeles if you want to be an actress," Donovan says.

Soon enough, however, she began to feel the strain of being a small fish in a big pond. Hiring talented engineers, she says, was prohibitively expensive in San Francisco, as was office space. So when Zach Ware, a Zirtual client and VegasTechFund partner, put Donovan in touch with Hsieh, it didn't take much convincing to get her to relocate Zirtual's headquarters to Vegas.

Since opening an office at The Ogden, a luxury condo building occupied largely by Zappos employees and VegasTechFund portfolio companies, Donovan says one of the biggest perks of being part of the Downtown Project is having unfettered access to Hsieh and his fleet of influential friends.

"I'm obsessed with logistics and operations, so Tony put me in touch with the president of UPS," Donovan says. "In San Francisco, there are hundreds of people trying to court and woo and get advice from a select group of mentors. It's easier to be dismissed."

But while founders may be lured by all Downtown Project has to offer, attracting enough employees to those businesses is proving to be a tougher sell. For Keller Rinaudo, CEO of Romotive, relocating to Vegas back in 2011 was a no-brainer. After completing TechStars Seattle, where he and two co-founders were developing his Romo product, which combines hardware and software to turn any iPhone into a personal robot, Rinaudo got a call asking him to come to Las Vegas and meet Hsieh.

"I came in, talked to him about what we were doing, and Tony was like, 'Here's a free apartment. Move in here, and build your robots,'" says Rinaudo of their first meeting in 2011. "That sounded pretty good to us, so we took him up on it."

Over the course of a year and half, Romotive grew to 18 employees, secured a $5 million Series A investment from VegasTechFund, and was shipping tens of thousands of Romos to more than 30 countries around the world. Romotive quickly became the poster child for Downtown Project, but in just a few short weeks, Romotive will be relocating to more obvious pastures: San Francisco.

Challenges to Hsieh's Bet

"It's getting to the point where if we're going to build a company around this idea of making affordable robots for everyone in the world, we're going to need to be able to hire 1,000 people, not 20, and we're going to need access to the best roboticists in the world," Rinaudo says. "Those people are in Boston or Palo Alto, and we concluded that we really need to go where they are."

Many in the tech community viewed this decision as bad news for Vegas, but Rinaudo disagrees. "I think having a robotics company in San Francisco that's a shining example of how you can start a weird, ambitious company in Vegas and grow it quickly will serve Downtown Project more than it will hurt it," he says.

Hsieh, for one, was supportive of Rinaudo's decision. "Nine years ago, Zappos moved from San Francisco to Las Vegas, but that didn't become the standard trajectory of Silicon Valley start-ups," Hsieh says. "I think we'll see some companies moving, but most staying. What's important is the constant influx of new talent, the pace of which is actually accelerating in Downtown Vegas."

While he may have laid down a solid foundation already, Hsieh says he knows there's still lots of work to be done, and it won't happen overnight.

"I come from a tech background, so I'm used to moving fast. Anything related to buildings and real estate just takes a longer time," he says. "I think the most important lesson I've learned from other cities is you can't just build a pretty building and hope that things will work out. You need to focus on the people and the community first."

IMAGE: Flickr/Roadsidepictures
Last updated: May 22, 2013




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