Las Vegas incubates thriving startup scene | Crain's

Las Vegas incubates thriving startup scene

It was an ambitious, and some would probably say a bit foolish, endeavor: put $350 million into an investment fund to grow a struggling downtown into an entrepreneurial, creative and business-friendly city.

But that fact hardly deterred billionaire Zappos CEO Tony Hsieh from investing $350 million of his own money into his investment vehicle, the Downtown Project, to make downtown Las Vegas the new Silicon Valley.

Designed as an all-purpose investment fund for building a "four-minute-mile" city in accordance with Hsieh's vision of making downtown a startup capital and community hub. The Downtown Project had funds earmarked for supporting real estate development, arts culture and entertainment initiatives, and attracting, retaining and incubating small businesses – with a heavy emphasis on tech startups.

It has been five years since the launch of the Downtown Project experiment, and many businesses were started in that time. Many also failed. Since then the Downtown Project has shifted its focus away from incubating new businesses to supporting its own startup survivors, while also focusing more on real estate development.

Still, the Downtown Project also spurred more diverse thinking on economic development and activity from other city stakeholders. Call it "the Downtown Project effect," if you want.

"The Downtown Project were early adopters and pioneers in helping Las Vegas and we want to continue down the path," said Patrick Sinnott, manager of business development for the city's Economic & Urban Development department. "We're happy to give them credit in being pioneers, helping recreate our downtown, and helping Las Vegas get on the radar as tech innovators. The city is working hard to keep up with the pace of change necessary to ensure we stay there for the future."

Eighteen months ago, the Las Vegas City Council issued a directive that established the Innovation District downtown, a place that was meant to concentrate smart-city technology infrastructure investment and function as a testing site for the internet of things.

Sensors have been deployed downtown to collect information on relevant data for implementing smart-city and mobility technology. These sensors capture real-time data of pedestrian and traffic movement and interaction, and can also distinguish sounds – such as smashing glass versus glass falling and breaking – and give environmental readings of, say, carbon monoxide levels. These sensors transmit data through fiber optic cables installed underground for fast data transmission.

"With all of the sensors the city has deployed, we want them to be secure and we want that data coming to our partners and us only," said Don Jacobson, IT business partner for the city of Las Vegas.

With this infrastructure already set up with smart-city and mobility tech in mind, the Innovation District has positioned itself as a highly desirable area for companies developing this kind of tech to relocate and perform research and development, including their first product tests.

Autonomous vehicles have been a major focus so far, with Audi choosing Las Vegas to launch its pilot autonomous vehicle program, and the city making national headlines for debuting the first self-driving, fully electric shuttle on public streets in January. Jacobson says the shuttle will run again in August with an even more ambitious around-the-block route. Meanwhile, Hyperloop One completed the world's first full-scale hyperloop system, the Las Vegas DevLoop, just north of the city earlier this year.

"The city wants to be known for innovation and wants to encourage companies large and small to bring their tech to Las Vegas and work with us to integrate them into our community and test their products," Sinnott explained. Companies "want to speak with us about our expertise in piloting projects because we're getting a reputation for being nimble and responsive to tech being tested in a real-world environment."

He says that they work with many companies on preproduction technologies as a pilot market that allows the companies to test and refine their prototypes. "This puts us at the leading edge of new market developments," Sinnott said.

Dan Langford, innovation director for the Nevada Center for Advanced Mobility and industry commercialization manager for the Nevada Governor's Office of Economic Development, says the state of Nevada is doing things a little differently.

"It's not all about incubators and shared spaces," he said. "There are other ways of generating activity."

The office's Knowledge Fund supports what Langford refers to as "virtual" incubators focused on specific industries – attracting the startups first and then worrying about building out dedicated spaces for them later.

One example he cites is WaterStart, an incubator for new technologies targeting issues of water resource management and sustainability located within the state's Desert Research Institute. It is home to half a dozen companies from overseas that are basing their U.S. operations in Las Vegas.

"We target foreign companies because we can offer a lot more to foreign startups and entrepreneurs, and bringing that brain trust to the United States is an advantage in itself," he said.

Another incubator called the Nevada Center for Advanced Mobility is in the works and will function in much the same way: targeting tech companies from around the planet.

"We focus on leveraging the needs of the state," said Langford. "Any startup we'll support is specifically trying to solve problems and challenges we have within the state. We start with a need. If we have a need for mobility or water tech, we go out globally and search for those solutions. We're also targeting industries that make sense, not trying to fit square pegs into round holes."

Such companies then perform their pilot tests here, which, he says, is often their biggest challenge.

While there is certainly a push – a necessary and long overdue one, as any economic analyst would argue – to diversify Nevada's gaming-dependent economy and make it more recession-proof, Langford acknowledges that the governor's office also supports programs that drive innovation in gaming and hospitality.

"A lot of that innovative technology isn't actually here. The customers might be, but those startups and tech aren’t. By growing that industry here in Nevada, that's still diversifying – adding businesses and industries that were not here before."

Even so, he adds, there's still room for diversification.

While creating a startup culture from scratch was a noble, if not entirely successful, undertaking, it would seem that the Downtown Project was a real catalyst in the city to make significant efforts to diversify the economy.

"A lot of [opportunities] are not going to pan out, but you only need a few of them to pan out to have a successful future," said Stephen Miller, director of the Center for Business and Economic Research at the University of Nevada Las Vegas. "The more activity we can get going in trying to diversify the economy, the more likely we will be able to diversify the economy. And that is going to be a slow process."

July 18, 2017 - 7:18pm