The Next Silicon Valley

Sin No More

Can Tony Hsieh turn downtown Las Vegas into a family-friendly startup utopia?

59638983 CEO Tony Hsieh

Photo by Ethan Miller/Getty Images

Tony Hsieh has a vision for Las Vegas—and it doesn’t include glitz, gambling, sex, or Celine Dion. Instead, the fabulously wealthy founder of Zappos and 39-year-old wunderkind plans to turn the proudly sinful city into the one thing it absolutely isn’t: a family-friendly startup paradise.

In 2010, Hsieh announced a $350 million investment in the city, with $200 million for real-estate investments, $50 million for tech startups, $50 million for arts, health care, and education, and $50 million for small businesses. (The source of the investment money is hazy, but much of it may come from Hsieh’s own pockets.) The plan, dubbed the Downtown Project, is designed to foster entrepreneurship and innovation, especially in Hsieh’s own field, tech. But business is really just the first step. When Hsieh’s project is complete—by the middle of the decade, he hopes—he’ll have created a seemingly paradoxical utopia: A new Silicon Valley just blocks from the Las Vegas strip.

And early signs are encouraging. Earlier this year, Hsieh moved Zappos’ headquarters from a nearby town to Las Vegas’ former city hall, saving it from desertion and endearing himself to locals. Since 2010, he’s convinced over 60 diverse tech startups to move to Las Vegas from other states and even other countries, luring them to the city with investments and guarantees of growth. Included in the pack are Zirtual and Tech Cocktail, majors players within the startup community, as well as OrderWithMe, an award-winning company that helps small businesses buy from China. OrderWithMe was an especially gratifying grab: The business, originally based out of China, had planned to settle in Silicon Valley, but two days touring Hsieh’s version of Vegas changed their minds.

Still, Hsieh remains modest about the obvious comparison. “We aren’t trying to create the next Silicon Valley,” he demurred in an interview with Slate. “Our goal is to help accelerate downtown Vegas to become a place of inspiration, entrepreneurial energy, creativity, innovation, and discovery.” Hsieh sees the Downtown Project “as a lifestyle instead of as annual events”—a continuous flow of innovation, education, and green development.

Zach Ware, a Downtown Project booster as well as founder and CEO of Project 100, echoes the sentiment. “There are a lot of things about Silicon Valley that don’t support a spirit of collaboration and innovation,” he said to Slate. The project instead aims “to be a hub of creativity … by focusing on the culture of the communities and creating opportunities for people to work and play closer to one another.”

That sounds more than a little utopian. Hsieh isn’t just building a tech hub: He’s building an entirely new community—even, in a sense, a new city. In interviews, Hsieh frequently notes that he was inspired by Harvard economist Edward Glaeser’s Triumph of the City, which fiercely advocates for the kind of dense, innovative urban area that the Downtown Project aspires to build. And Hsieh holds an almost romantic faith in a city’s ability to foster creativity through what he called “the 3 C’s”: collisions, co-learning, and connectedness.

There’s a fourth C, however, that a city needs before the other three become possible: community. And here’s where the Downtown Project distinguishes itself from the standard urban renewal project. Hsieh doesn’t want to house tech masterminds in a luxurious but insular, Google-style campus, or simply invest money in the area as a gesture toward philanthropy. Rather, he’s attempting to build a new community from the ground up—with a distinctly innovative twist.

To remedy Las Vegas’ notoriously terrible health care services, Hsieh has already coaxed Dr. Zubin Damania—a doctor, public health advocate, and star of his own arguably funny Web series—to open an Iora clinic in downtown Las Vegas.* The clinic, which follows an experimental method primary care, will provide residents with same-day appointments, nutritional advice, counseling, and 24-hour Skype access for about $70 a month. Aside from the flat fee, patients won’t pay a penny for care, and they won’t have to go through the middleman of an insurance company.

Although Hsieh’s vision is based around startups and techies, his ultimate goal is to draw a demographic long vanished from downtown Last Vegas: families. Connie Yeh, Citigroup’s former vice president (and Hsieh’s cousin), co-leads the project’s education initiative with Meg Murray, a specialist in education psychology. Together, the two are opening several private and charter schools, with curricula drawn from the latest research in childhood development.

If and when Hsieh succeeds in drawing families to his über-urban paradise, he’ll need to give them something to do besides work—a challenge that presents the Downtown Project with perhaps its biggest roadblock. Hsieh has already drawn hip, even hipster restaurants to the area, invested in parks, and sponsored art contests and music festivals. But the fact remains that Las Vegas already has a massive entertainment industry, and business is booming. If Hsieh wants his project to succeed, his entrepreneurial bubble must provide a viable entertainment alternative to those that made Las Vegas famous, and synonymous with sin.

To his credit, Hsieh understands what he’s up against. He notes his project “has generally been focused on areas outside of gaming,” electing instead to emphasize “fashion, arts, music, small businesses, American manufacturing, and much, much more.” Hsieh believes “If you bring together entrepreneurial and creative people from diverse backgrounds and networks together into a community that have a bias to share and collaborate statistically, the magic will happen on its own.”

Ware agrees. “We don’t necessarily ‘provide’ entertainment,” he told Slate, “but are focused on investing in the music and entertainment community to give artists an opportunity to follow their passions.”

In one sense, this notion isn’t anything radical—just an effort to bring new types of creativity into a city traditionally dominated by a notably adult definition of fun. In a different light, however, it begins to look a lot like moral gentrification. At bottom, Hsieh plans to convert a city of sin into a family-friendly playground of innovation. Presuming Hsieh’s vision succeeds, his startups and urban renewal projects might elbow the city’s mighty casinos out of the spotlight.

Whether that’s Hsieh’s intention is anyone’s guess. The young billionaire is relentlessly enigmatic, avoiding undue media attention and playing his cards close to the vest. No one seems to know anything about his political views or his personal life. Aside from an amusingly trivial spat with the deeply spat-prone Kanye West, Hsieh receives roundly positive press; even a coalition of charter school critics have kept mum about his plans to revamp the education system. And Las Vegas locals are generally pleased to see a previously neglected area undergo rapid revitalization.

At this point, there’s little doubt that Hsieh’s basic goal—to bring top tech startups to Las Vegas, and to improve the area in the process—will succeed. In fact, with 60 startups already calling the city home, it essentially already has. The only question left is whether this enthusiastic bunch can transform the city from a capital of vice into a tech utopia. Hsieh clearly has the vision, and the money, to make it happen. Whether Las Vegas is willing to play along remains to be seen.

Correction, Dec. 9, 2013: This article originally misspelled Iora, the name of the clinic Tony Hsieh coaxed Dr. Zubin Damania into opening.