Why Is Tony Hsieh Betting $350M on Vegas?

“I think the piece that’s getting missed by the media is how fast this is changing,” says Joe Henriod about downtown Las Vegas. He’s one of many entrepreneurs who have moved here to be part of the emerging tech and small-business hub being built in a formerly depressed area better known for check-cashing businesses and rent-by-the-week motels.

The changes are driven by the Downtown Project, a $350 million effort initiated by Zappos.com CEO Tony Hsieh, featured in the January 2014 issue of SUCCESS (to read the cover story, subscribe for instant access). Reimagining the downtown evolved from the decision to move the online retailer’s headquarters from Henderson, Nev., outside Las Vegas, into the former city government complex. Of the money Hsieh has dedicated to the project, $200 million goes to real estate acquisition and development, $50 million to funding early-stage technology companies, $50 million for small-business startups and $50 million for education and culture.

Henriod and co-founders brought TicketCake from Salt Lake City about a year ago. “I wish when we moved down that I had taken a picture from every corner,” says Henriod, CEO of the ticket-selling service for customers focused on improving sales over the long term. “It’s hard to imagine how undeveloped it was a year ago.”

The Downtown Project, officially launched in early 2012, has created more than 400 jobs as of early December, and boasts small businesses, including restaurants, retail, arts and entertainment. Its Vegas Tech Fund has more than 70 investments in tech startups, says Andy White, who heads the fund. These include companies doing everything from near-space tourism using high-altitude balloons (World View) to cyber security that focuses on physical authentication through smartphones rather than using passwords (LaunchKey), to experimental publishing for e-readers, tablets and mobile devices (Not Safe For Work Corp.). Under the Vegas Tech Fund umbrella, Nimbus specifically recruits and funds hardware companies. Its portfolio includes businesses building robotics, drones used for farming and construction, technology used in connected or smart homes, and 3-D printing, says Nimbus “hardware sorceress” Jen McCabe.

Elsewhere downtown, the recently opened Container Park—built of shipping containers and modular structures—now houses a variety of retail shops, galleries and restaurants, and features an illuminated geodesic dome, a huge praying mantis sculpture that shoots fire from its antennae and an interactive play area for kids and adults called the Tree House.

Container Park is on the site of an old motel that was razed because it was deemed unsound. But whenever possible, downtown leaders seek to repurpose existing buildings, like one of the city’s first drive-up motels, Fergusons, which is now being renovated for use as a complex of restaurants, bars and retail establishments. Many other small businesses have already been created in existing spaces downtown. One of the early ones is Emergency Arts, which had been a medical clinic. It now houses The Beat coffeehouse as well as individual art galleries in the rooms where doctors used to examine patients.

Bringing more people downtown also required providing services, including health care and education. Turntable Health is an innovative health care initiative providing physicians and health coaches, as well as education and wellness programs, for a monthly membership fee of $80, or $60 for children under 18. A new private school, 9th Bridge, offers an approach based on neuroscience and emotional learning, with a focus on creativity and entrepreneurship (profit-and-loss statements will be used to build math skills, for instance). The school serves kids from 6 weeks of age through kindergarten, with plans to increase the number of grades each year.

Transportation was another issue addressed by downtown leaders. Zach Ware, who headed the Zappos campus move, is now leading Project 100, a completely integrated transportation system that enables people to pay a membership fee—rather than paying per ride—to use a variety of modes of transportation, including bikes, shared vehicles, shuttles, very small “urban vehicles” for short trips, and even electric Tesla Model X sedans.

“Our fundamental thesis is that by making movement easier, people will move more frequently. Cities are just a collection of people, and our job is to connect people more quickly, more directly, which makes life better, happier, more innovative and so forth,” says Ware of Project 100, which is a few months from launch. “Ultimately, we see this scaling to other cities.”

Ware is also co-founder of Work in Progress and 701 Bridger Teamspace, which provide workspace, tools and other amenities for entrepreneurs and others working independently. There are two more co-working spaces under development, Ware says.

Beyond the brick-and-mortar improvements are events that continually draw people here—either to share ideas, listen to engaging speakers, network, have fun or to explore possibilities of relocation. Themed events each month include Tech Cocktail Week; fashion week produced and curated by Stitch Factory, a fashion incubator; Catalyst Week organized by CatalystCreativ to bring together thought leaders in creative fields, social entrepreneurship and nonprofits; and First Friday, a monthly art festival. There are also regular smaller events for families, people of all ages, tech entrepreneurs interested in co-working, people seeking to create a healthier community, and more.

Through all of this, a community is emerging, and a collaborative spirit shared by these entrepreneurs, small-business owners and other urban pioneers. The vibe is palpable even as you walk the streets, pop into a restaurant or store, or share an elevator ride in The Ogden, a modern high-rise that’s home to many downtown denizens including Hsieh. The Ogden also houses the posh crash pads where Downtown Project guests stay.

Creating a community was Hsieh’s goal. As Zappos outgrew its campus, the original thinking was to build a new self-contained campus, but that idea quickly evolved as Hsieh spent more time downtown and saw its potential. Better than being insulated was to be in an environment where serendipitous interactions, or “collisions,” could occur between Zappos employees and a variety of people. That’s how most innovation happens, Hsieh tells me as we talk in the living room of one of three connected apartments where he lives, works and entertains high above downtown.

“Passionate people transforming downtown Las Vegas into the most community-focused large city in the world,” is how leaders of the project describe their goal. And return on community (ROC) is a phrase you’ll hear a lot more than return on investment (ROI). Giving back to the community is even required of the companies that get funded here. And, in exchange, they get something more valuable than money: mentorship from Hsieh and cohorts, some of the brightest minds in business. Charter membership in this “city as a startup,” as it’s been called, also conveys intangible benefits, including support from other Vegas entrepreneurs.

“The resources here, in terms of mentorship and just a passionate community is what we liked more than anything,” Henriod says. “Not only could we go to funding, but people were reaching out to help connect us with people who would use our product… and help make it better.”


To read more about Tony Hsieh in the January 2014 SUCCESS cover story, download the SUCCESS digital edition (viewable on desktop, mobile and tablet.)

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