Turning Vegas into a hot spot for work
— -- LAS VEGAS -- It's 100 degrees in the shade, and Tony Hsieh is the coolest guy in the room. The Zappos.com co-founder and CEO is holding court at an outdoor festival on how he and a quilt of local business people intend to transform a 1.5-square-mile patch of land here into a model for communities of the future.
Even in Vegas, this qualifies as a big bet. Hsieh, whose e-commerce powerhouse Zappos is firmly planted here, has invested $350 million of his fortune into a grand plan to revitalize downtown into a pre-eminent location for technology start-ups, co-working space and the arts.
Like Detroit and other cities, Vegas is wrestling with the future of its downtown. The audacious vision, which Hsieh hopes to pull off in just a few years, would infuse the desolate downtown with sparkling new workplaces, housing and cultural destinations. "This isn't so different from what we built at Zappos," Hsieh says over lunch earlier this month. "We're just scaling it."
Hsieh has poured $200 million into Downtown Project for land and buildings.
On top of that, $50 million will go to tech start-ups that Hsieh plans to recruit to the area with seed investments of $100,000 to $500,000 each. Another $50 million will go toward luring local small businesses, such as grocery stores, bakeries, yoga studios and restaurants. An additional $50 million will go toward education and community projects.
STORY: Hsieh's inner circle is key part of project
By the time he's through, he hopes to help create the world's largest co-working space -- where fledgling companies, independent entrepreneurs and angel investors toil in an informal cooperative setting -- and a thriving tech ecosystem of young start-ups while burnishing downtown's downtrodden reputation.
"It is the revitalization of the city's core," says Las Vegas Mayor Carolyn Goodman. "We're seeing the fruits of a dream that started with my husband." (Oscar Goodman was mayor from 1999 to 2011.)
Like so many entrepreneurs, Hsieh and his team of advisers are pursuing tech companies to jump-start the regional economy. An influx of tech start-ups has proved to be a driver for local businesses and an impetus for cultural enrichment. In San Francisco, there are some 36,600 people who work in tech, up 13% from the dot-com peak in 2001, says real estate services firm CBRE. More than 500 start-ups have set up shop in Los Angeles and its environs.
There is competition from elsewhere in Nevada, too. In Reno, Apple plans to set up shop in a big way. In late June, Apple said it would build a $1 billion data center there. Just down the interstate from Reno in nearby Fernley, Amazon.com has a 322,000-square-foot fulfillment center. (Amazon acquired Zappos for $928 million in 2009.)
"This project could be insane," says Zappos co-founder Nick Swinmurn, who left the company in 2006 and now lives in Northern California. "(The project) could be the next Austin or just another sleepy couple of blocks in Vegas. I think it will take five years." But "Tony is in it for the long haul," he says. "He wants to live in a cool place, a utopia."
By the end of 2013, Zappos plans to relocate more than 1,500 employees from its suburban Henderson, Nev., headquarters, where it has been based since 2004, to Las Vegas' City Hall building downtown. The 300,000-square-foot campus, which broke ground in July and is under construction, can accommodate 2,000 workers. (Some 200 Zappos workers moved to a temporary home downtown in late August.)
"The idea went from 'let's build a campus' to 'let's build a city,'" Hsieh says in his soft voice.
Naturally, Hsieh wants as many Zappos employees to move downtown as possible, so one of the first uses of all that money was to snap up about 50 units in the 25-story The Ogden, one of the neighborhood's only luxury high-rise condo buildings.
Think of The Ogden as tech's version of New York's legendary Chelsea Hotel, known for its celebrity residents. But at The Ogden, engineers and technicians -- not artists and poets -- live and work side by side in a building that is equal parts dormitory and office complex.
One tenant, Romotive, wants to create the world's first affordable personal robot, for $150. Perched on the 21st floor, covering some 22,000 square feet, the transplanted Seattle start-up has sweeping vistas of the Strip. But the company's 18 employees aren't tempted by gambling, bars and other diversions. They typically work 18-hour days, eating and socializing with one another at the Ogden.
"We're building the strongest ... culture here," says Romotive CEO Keller Rinaudo.
Online marketer Digital Royalty and Ticket Cake, a ticketing agency, are among The Ogden's other occupants.
A block away, Las Vegas Fashion Lab, a 5,600-square-foot co-working space, is about to open. "There's so much momentum and excitement," says owner Meghan Boyd. "Things are popping up on the grid."
The immediate neighborhood is dotted with several new businesses -- Le Thai restaurant, Tech Cocktail video production, the Coterie boutique, and the forthcoming Eat and Commonwealth restaurants. The crown jewel is the city-funded Smith Center, a $150 million theater currently home to a production of Wicked. Switch Communications opened a co-working space for midsize tech businesses in the southwest part of town.
To be sure, plenty of work needs to be done. There are pockets of vacant buildings, plenty of homeless people, and sirens from emergency vehicles puncture the night.
Still, longtime local businessman Michael Cornthwaite contends that "people go where the jobs and vibrant new businesses are."
Hsieh's Vegas play
Sin City is making its bid for tech start-ups and others under the leadership of the architect of one of high-tech's biggest success stories. Hsieh (pronounced shay) not only helped build Zappos into a billion-dollar-plus seller of shoes and other items but a company renowned for its unusually strong culture that encourages employees to "create fun with a little weirdness."
The 38-year-old Hsieh's pricey gambit to rebrand this city's downtown is the residue of his long-held philosophy that serendipitous "collisions" between people spark ideas and relationships that foster deeper ties and even more ideas. His 2010 tome on the workplace, Delivering Happiness, has sold more than 400,000 copies.
Hsieh's approach here differs from what other tech-starved cities are doing. Municipalities stretching from Los Angeles and Austin to New Orleans and New York are dangling cheap land, tax breaks and their cultural charms to attract start-ups. So far, San Jose, San Francisco, New York and Boston are the big winners this year, based on venture funding supplied by Thomson Reuters.
Las Vegas was not among the top-20 U.S. regions on the list because it lacks the engineering talent available in tech hot spots such as the San Francisco Bay Area, Austin and Boston, and therefore is not a logical destination for tech start-ups, says Mark Heesen, president of National Venture Capital Association. "Las Vegas gets its place in the sun" with the annual Consumer Electronics Show in January, Heesen he says. "Everyone comes in, and everyone leaves. You don't see tech stay there."
Still, Vegas' social activities could be alluring to young workers, who crave a city escape to go with work, Heesen and others concede. The same appeal has helped San Francisco sway high-tech workers from more-suburban Silicon Valley.
"Las Vegas has the advantage of bringing 1,600 employees downtown and, with them, suppliers and vendors," says Paul Quintiliani, director of the commercial real estate division of Kamehameha Schools, which owns 50 acres in and around Honolulu.
"That is a huge game changer," says Quintiliani, who was in town to study Hsieh's revitalization plan.
"There is an explosion of energy, of people moving and money moving," Mayor Goodman says, comparing downtown's gradual renaissance here to earlier efforts in Baltimore and Los Angeles. Like those urban centers, Las Vegas is rebooting downtown with a new medical center, art district, hotels, restaurants and, if Goodman gets her wish, a sparkling new arena.
"With $350 million, you can turn any two-block area into something special," Swinmurn says.
A city of reinvention
Las Vegas has prided itself on reinvention since gangster Benjamin "Bugsy" Siegel helped put the desert outpost on the map in the 1940s.
Gradually, the city evolved from strictly a boozy watering hole for high rollers to an entertainment epicenter for the likes of the Rat Pack, Wayne Newton and Celine Dion. Today, the city is just as comfortable being a family vacation spot, while retaining its affinity for gambling, night clubs and other late-night diversions. It's a travel destination, says Dave G. Schwartz, director of Center for Gaming Research at the University of Nevada-Las Vegas.
Yet downtown has stubbornly remained a thorny issue for city officials after being abandoned long ago by casinos and hoteliers for the Strip, just 3.5 miles away.
Hsieh's project is another stab at invigorating downtown. In the mid-1990s, a dazzlingly lit canopy on Fremont Street was built. The 300,000-square-foot Neonopolis mall adjacent to the canopy followed five years later. Both have met with middling success. What separates the Hsieh plan is its gradual, "organic" approach to attracting people first, says Harvard professor Edward Glaeser, author of Triumph of the City, which outlines the effects of major metropolitan areas on civilians. His book is influential among Downtown Project members.
"The most striking thing is its bottom-up entrepreneurship vs. the typical top-down government infrastructure," says Glaeser, who visited here in February and spoke to Zappos employees. "Bring in small businesses, and the neighborhood will evolve."
"Cities are rarely built in a day," Glaeser says. "It takes years."
Surveying pockets of construction downtown, the ever-cool Hsieh predicts a "completely transformed" area in a few years. "People will say what the hell happened?" he says, laughing.