Las Vegas courting high-tech start-ups

Erin Neff

Sunday, June 18, 2000 | 10:17 a.m.

Las Vegas is hyped as a future "Silicon Oasis" with dot-coms and high-tech companies sprouting up around the desert like new housing developments.

While the growth hasn't reached such a fervent pitch yet, the local business community realizes those businesses aren't just coming.

Some are already here.

The trick now is figuring out how to keep them.

"The state hired a consultant to find out what we need to do to attract the top 50 gazelles, as these high-tech babies are called," Somer Hollingsworth, Nevada Development Authority president, said.

"We don't need gazelles," Hollingsworth added. "We have cheetahs that eat gazelles."

Tech start-ups are drawn to Las Vegas because of the state's business-friendly tax structure, the relative ease in and out of McCarran International Airport, the telecommunications infrastructure and the cheap cost of living.

But Las Vegas is still more akin to an Ozark truck stop on the proverbial information superhighway than to a high-speed on ramp. The region thus far holds little to make those passing through stay for more than quirky stories to tell back home.

"There are a lot of companies that move in and open their doors every month in Las Vegas," said David Willman, managing director of Integrated Information Systems in Las Vegas. "There's also a lot of companies that close their doors every month."

Willman's company, which writes software applications for other tech businesses and traditional companies, opened an office in Las Vegas last December. The company has 500 employees nationwide, but the seven in Las Vegas have had more difficulty making inroads into this market than their counterparts in other cities.

"Even though it's hard to get a foothold from a business standpoint because it's such a close-knit community, the people are super-friendly," Willman said. "It's harder to walk into New York or Boston and really get involved because there's so much history there already."

The same attitude that built megaresorts in record time on the Strip helps fledgling tech companies view Las Vegas as the next Silicon Valley.

The number of such businesses locally is hard to pinpoint, in part because of the secrecy bordering on paranoia that some companies project in the ultra-competitive New Economy. But the Nevada Development Authority has ties to at least 36 such companies employing anywhere from 10 to 2,500 people. An estimated 16,495 people work statewide in high-tech jobs, the majority in telecommunications.

Statewide, 7,000 high-tech jobs were added during the period from 1993 to 1998, a 74 percent increase from the previous five-year period, according to a report by the American Electronics Association.

Still gaming dominates both the local and state economy. The Nevada Department of Employment, Training and Rehabilitation estimates only 3.3 percent of Las Vegas jobs in 1999 were in manufacturing -- the grouping in which high-tech companies are classified.

While dot-com workers quietly type away at computers in nondescript offices throughout town, several companies have become local success stories.

PurchasePro.com Inc., for example, was founded in Las Vegas in 1996 and has about 800 employees. Travelscape.com Inc. was sold to Microsoft subsidiary Expedia Inc. for $95 million in stock.

Big names

HelloNetwork, SimpleSearch and Lowestfare.com hope to someday rival names such as Station Casinos Inc. and MGM Grand Inc. for local prominence in business publications. Christine McKiernan, vice president of client services for the development authority, said she talks with about 10 companies each week that are interested in Las Vegas. The problem, she says, is that those companies are also shopping for incentives from other cities and states.

New Mexico recently lured IBM and 2,100 jobs at $51,000 a piece with $13 million of state funding, McKiernan said.

"When we win something, it's really been a challenge," she added.

Cities with established high-tech footholds, such as San Jose, Calif.; Boston; and Austin, Texas, also have something Las Vegas doesn't -- a deep pool of well-trained technology workers.

"It is very, very difficult to find people here in Las Vegas that are quality employees," said David Johnson, chief operating officer and co-founder of Everycontractor.com. "We've had to recruit in Washington."

Johnson's start-up in Las Vegas provides a one-stop database for the building and construction industry by providing auctions, e-commerce and business-to-business links.

And while he acknowledges Las Vegas has a lot of work to do to become the next Silicon Valley, Johnson wouldn't be here if he didn't think it was going to happen.

"A lot of people don't realize what Vegas has," Johnson said. "The town, the state and the economy support the Internet type of lifestyle."

Las Vegas Mayor Oscar Goodman is trying to entice high-tech companies to move into existing office space downtown and is looking for a big-name business to open some sort of corporate campus on undeveloped land.

"I've had guys in my office you wouldn't think to take seriously at first," Goodman said in a recent interview. "I only mean that because they're so young.

"This is the wave of the future," he added. "They're richer than I am and they could do wonders for downtown redevelopment."

Goodman is attempting to raise $5 million from local bankers to entice private capitalists to raise another $25 million for a venture fund to pay for a high-tech incubator downtown.

The incubator will nurture baby companies and package them for venture capitalists and Wall Street. Once turned out, Goodman said he hopes their successful ventures spawn a "high-tech ambience" downtown with cafes, coffeehouses and nightclubs similar to San Francisco's SOMA district.

San Francisco and Los Angeles are saturated with such incubators, leading new businesses to look elsewhere.

"What we're drawing is those start-ups that can't afford to be in the (Silicon) Valley," Hollingsworth said. "And God there's a lot of them."

Willman of Integrated Information Systems said his company looked at Los Angeles, Boston and Atlanta before picking Las Vegas.

Perfect market

"We thought that Las Vegas was just the perfect market for the business we conducted," Willman said. "Before if a company wanted to do something serious on a custom software development scale they had to go to L.A. or Phoenix. But we're finding that people prefer dealing with a local provider of that service."

The communication between local tech companies doesn't just give them added business, it helps lure others to the area, Hollingsworth said.

But most local tech companies are already struggling with the same problem that keeps the big-name businesses away -- what critics call a second-rate university.

"The best thing the state can do to bring other dot-coms to Nevada is to encourage educational facilities stressing technology," said Tony Timmons, a spokesman for Purchase-Pro.com, an online procurement company founded in Las Vegas.

UNLV President Carol Harter has met with the two firms committed to the incubator project and has floated the possibility of UNLV Foundation funding for the project.

University spokesman Tom Flagg said Harter is committed to establishing specific training for the high-tech workers coming to Southern Nevada.

"It is one of her top priorities," Flagg said.

McKiernan said the changing nature of technology might make it easier to train workers at the two-year community college level. The development authority plans meetings with both UNLV and the Community College of Southern Nevada to discuss training programs.

"The university knows that they need to make changes to accommodate high-tech," McKiernan said.

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