How Zappos CEO Tony Hsieh Will Change Las Vegas Forever

Tony HsiehHsieh looking over the city with Frank Gruber of Tech Cocktail, one of the startups he’s investing in.

Photo: Aimee Groth, Business Insider

Zappos CEO Tony Hsieh has quietly emerged as the most important man in Las Vegas. As he invests $350 million of his personal money in the city, we visited Vegas to see how he’s going to change the town—and what it means for his online retail company. 

PHOTOS: See how Hsieh is spending his money in Las Vegas >
Hsieh is moving Zappos from suburban Henderson to downtown next fall (into the old City Hall building, which will cost an additional $40 million to renovate), but that’s just one part of his vision.

The 38-year-old wants to revitalize the downtown area dramatically, and make the city a place where his employees would want to live and play—and eventually make it one of the coolest, smartest cities in the world.  

His $350 million investment all goes back to finding a cool bar downtown. When he first moved Zappos to Henderson in 2004, he spent his weekends on the Strip; but then he discovered the Downtown Cocktail Room. He got to know the bar’s owner, Michael Cornthwaite, who says that over several months and some “magical discussions,” he convinced Hsieh to move his corporate offices downtown and invest in the city. 

“It was almost too good to be true that [City Hall] was a few blocks away from Michael’s bar and all of that,” Hsieh tells us. “Originally, we were just saying, any plot of land anywhere. We’ll just build our own campus like Google or Apple or Nike. Michael convinced us not to do that. Apple and Nike have great campuses for their employees, but they’re not integrated [and don’t] contribute to the community around them. They’re kind of like these little islands.”

This all came about in 2010, a few months after Amazon bought Zappos for $1.2 billion.   

“Amazon knew we were running out of space, and we had to do something,” Hsieh tells us. “What really helped us coincidentally by timing, is that Amazon had just built a new campus and moved in when we started discussions about wanting to move downtown. I think Jeff Bezos thinks this is a really interesting experiment.”

And so does Zappos Founder Nick Swinmurn (who left the company in 2006). “Zappos is just a vehicle to further the downtown revitalization,” he told us. “I’m guessing 99.9 per cent of [Tony’s] thoughts relate to downtown now, not necessarily Zappos. I’m not implying that’s either good or bad from a Zappos perspective, as I have no idea.”

Hsieh lives in The Ogden, a luxury apartment complex nearly across the street from City Hall where he rents 40 rooms, which he uses to host guests from around the world. Most of the Downtown Project team and some Zappos employees live there, too.  

The nuts and bolts of Hsieh’s $350 million plan include:

  • $200 million in residential and real estate
  • $50 million in tech startups
  • $50 million in small businesses
  • $50 million in arts, education and culture 

So far, his Las Vegas Tech Fund has already invested in nine startups, with plans to ultimately fund between 150 to 200 startups at up to $500,000 each. The fund is headed up by Andy White, who joined the Downtown Project after leaving his executive director position at startup accelerator BoomStartup in Salt Lake City. 

Developer Andrew Donner of Resort Gaming Group brokered the $18 million deal to lease City Hall to Zappos, and now he’s handling all the commercial real estate transactions for Hsieh. As of this week, they’ve acquired around a dozen spaces. Donner says that “the goal is to accelerate what would happen in other cities in 15 to 20 years in 5 to 7 years” in downtown Vegas. 

The biggest boost will initially come from Zappos itself moving in, bringing about 1,500 employees into the area. “For a company that’s doing several billions of sales in year, driving those people into downtown, and driving other uses that will create jobs for retail, arts, tech — it’ll create hundreds and hundreds of millions from food and beverage sales to Zappos employees alone.” 

An official report estimates that the initial economic impact when Zappos moves downtown will be around $336 million.

“Is this guy really putting $350 million into building around a bar he likes? Is that really it?” says Swinmurn. “Well, yeah, it sort of is.” 

NOW SEE: PHOTOS: How Tony Hsieh Is Spending His $350 Million In Las Vegas >

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