Depending on who you ask, Tony Hsieh’s Vegas Downtown Project (DTP) has either hit yet another speed bump or made yet another wise, if long overdue, correction.
In the past few weeks, the DTP has been selling off many of its flagship entertainment properties. Several sources close to the project tell me that’s because Hsieh and his team are finally coming to terms with the fact that they’re not cut out to operate most of the businesses they’ve created or invested in. Instead, DTP will focus on what is working: Being the money behind the project– whether that’s investing in local small businesses, a handful of startups that appear to be doing well, and owning an ass-ton of real estate.
[Disclosure: Tony Hsieh and his Vegas Tech Fund are investors in Pando. Hsieh was not a source for this story.]
Earlier this month it was reported that Wendoh Media, publishers of Vegas Seven magazine and operators of several existing Downtown bars, had acquired a 50% stake in the annual Life Is Beautiful festival. We understand that Wendoh is also taking control of the struggling Inspire Theater, which Hsieh had hoped would become a TED-style speaker venue, as well as the Bunkhouse music venue. It is also taking over the lease on 302 Carson, which used to be the headquarters for the DTP.
One source familiar with DTP operations suggested that it was unlikely that much, if any, money changed hands in the deals. Instead, Downtown Project is likely to remain as a minority stakeholder in the properties in the hope that better management can help them get some return on their “significant” investments in developing them. One source was even more blunt, telling me that everything DTP has tried to manage itself has been a “shitshow.” I’m also told Hsieh, who last year formally stepped down as “leader” of the DTP, has also become tired of dealing with day to day management problems.
After offloading the DTP-operated properties, Hsieh and his team will focus instead on their successful investments and real estate holdings. Those same sources point to restaurants like Eat and properties like the Gold Spike hotel as success stories.
That said, even the investments appetite has narrowed. As we previously reported, the Vegas Tech Fund has had changes in management and strategy, with a new focus on using remaining funds to support the companies that are working, not placing new bets. In this Vegas NPR interview, new Downtown Project CEO Mark Rowland seemed to characterize the fund as winding down completely once the current amount is gone. It seems the real estate and small business plays have been the unglamorous heroes of the project– at least when someone else is managing them. In that regard, at least the group finally knows its strengths.
For those of us who have been watching the Downtown Project closely (my former company, NSFWCORP, was based in downtown Vegas and Hsieh was an investor) none of this should come as a surprise. For all of the media slobbering over Hsieh’s vision for a utopian city of tomorrow, the Downtown Project has long proved itself utterly useless when it comes to execution of that vision. By handing over the reins to companies with actual operations experience, Hseih and his team will be able to focus on what they are better at: Thinking big, making bets others wouldn’t make, and investing in startups and real estate.