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Factorli, an Early Casualty of the Las Vegas Downtown Project

Poof. Just like that, another empty warehouse in Downtown Las Vegas.

Nellie Bowles for Re/code

“Or you’ve got Jen McCabe, who is setting up a space called Factorli, in Las Vegas, to provide custom, small-scale manufacturing — kind of like a Kinko’s or a copy shop, but instead of printing flyers, they’re going to be able to print custom parts for American products.” — President Barack Obama, June 18, 2014

Factorli, the ambitious 25,000 square-foot manufacturing center in Downtown Las Vegas, was amazing. I spent a day there in July listening to rapturous young hardware hackers tell me about their vision and the $10 million backing they had just received from Tony Hsieh’s Downtown Project Vegas Tech Fund. They talked excitedly about the renewed investment in American manufacturing and the creation of a production center for Kickstartered hardware ideas. They dreamed about the revival of the city. More jobs! President Obama himself had singled it out as an example of American ingenuity.

When I went back to take pictures a few weeks later, it was gone. Poof. Just like that, another empty warehouse in Downtown Las Vegas.

Factorli was a startup manufacturing plant that was founded to do small-scale hardware production. Dreaming up cool projects was the easy part. Getting it made typically required trekking to China. Factorli was designed to fill in this gap, and to serve a new wave of hardware entrepreneurs in the crowdfunding era.

It was an example of the enormous ambition of Hsieh and his Downtown Project — architects spoke of turning Las Vegas into a new center for American manufacturing — and the hope that everyone, including Obama, had for it. Its demise shows just how tenuous projects are in the new Downtown Las Vegas, which itself is now threatened, as it eliminated 30 percent of its staff on Tuesday. Just a few weeks ago, its charismatic leader had turned over the reins of the Project to his lawyer, information Hsieh withheld as this project was being reported. And there have been brutal moments in that lonely desert city — three of Downtown Project’s most prominent entrepreneurs have committed suicide in the past year.

Factorli was one of the first lights to blink out in the dazzling new Downtown.

The rise and fall of Factorli demonstrates how the whims of one man and his small clique can make or break the dreams of many, almost overnight.

Vision quest

I met with Jen McCabe in July, two months after Factorli launched with the $10 million from Hsieh. The building was a nondescript warehouse on a wide street in Downtown Vegas. It was flanked by auto-repair shops, and across the street was a billboard that read, “Need Bail?” illustrated with a picture of a scantily clad female officer.

McCabe, whose office was in a converted paint booth within the warehouse, was exuberant. Petite, with bright gray eyes, she wore a silk dress, with her hair in a messy brown bun.

McCabe had come to Vegas from Silicon Valley in 2011 with one startup, which didn’t work out. So she joined another, Romotive, which worked so well that it got another round of funding and moved back to San Francisco.

McCabe stayed in Vegas. I asked her why.

“I just trusted Tony,” she said. “He looked at me seriously and unblinkingly, and when he laser-focuses in, when he speaks in that way, you absolutely know it’ll work out.”

Hsieh told her to spend 90 days doing nothing but writing down her startup ideas in a notebook, McCabe said. She came up with WeBeasty, a stylish, modern pet-oriented website. Hsieh said he’d fund it. Then she said she had a change of heart — she didn’t want to do “ModCloth for dogs,” she wanted to do hardware. Hsieh suggested that she become a venture capitalist. He gave her an uncapped ability to invest.

“Next thing I know, I had an email from Tony: “Here’s your single sign-off. Here’s the papers we use. Here’s your salary,’” McCabe said. “It was just, ‘Pick who you like’ — so I started investing.”

She invested in six companies in six weeks. Within four months, she had invested in 24. The average investment was $100,000.

Then she thought of Factorli. Hsieh liked the idea of a factory that was based in the U.S. and would serve a gamut of clients from the ambitious crowdfunded startup to larger companies doing prototyping ahead of a big project.

She closed the $10 million Series A round for Factorli on Valentine’s Day, 2014. At the opening party, which by all accounts was a good one, Hsieh and his partner Fred came, and scooted around the factory floor in circles laughing.

Factorli was set to open officially in time for CES, the big annual tech conference in January 2015. McCabe projected that the company would be processing $3 million in orders by its third year.

For McCabe, being in Vegas felt like being on a spiritual journey.

“In Vegas right now, it’s almost like on a Native American spirit walk, like a vision quest we’re all on,” she said. “A startup will test you professionally in every way, and it will break you personally. You have to melt yourself down and remold, and it hurts, and it’s a painful process, and you have to be hard but not brittle, and you have to stay malleable.”

Being in the city, McCabe said, had given her a newfound belief in herself and her abilities.

“I’ve done things in Vegas I’d never do anywhere else. I’m afraid of heights, and here I climb,” she said. “We’re building a factory from scratch in the middle of the desert.”

Falling out

McCabe’s sudden falling out with the cliquey Tony Hsieh-led Downtown Project posse was a major factor in Hsieh’s world, where he prides himself on investing in people rather than companies. At least one employee had complained to Downtown Project management, calling her “a bully,” one source told us. Also working against McCabe was the fact that she did not follow Holacracy, the flat power structure favored by the Downtown Project leadership.

And there were financial problems: One of Factorli’s Vegas Tech Fund partners, Zach Ware, told the employees about “fiduciary responsibility problems” as one of the reasons for closing the startup. Ware told me he hadn’t realized quite how much investment a manufacturing center would need.

Perhaps no one told Ware about McCabe’s comments to Re/code just two months before:

“With the funding closed, Factorli is setting out to buy a whole bunch of equipment, and also to build software that helps all the systems talk to each other and work at full capacity. ‘We have massive capex costs,’” is how McCabe put it in May 2014.

And it seems that the Downtown Project team lost interest with the Factorli idea. So they killed it.

By September, when I returned to visit, signs of trouble in Downtown Las Vegas were everywhere. I mostly noticed because I had procrastinated on these stories — I visited in July, and then didn’t make it back until September to follow up. By then, many of the new enterprises were gone: Factorli was shuttered, and so was the big co-working space, the Work in Progress campus at 701 Bridger Street. The Downtown Project’s startup boutique, Coterie, was on its way out. The Downtown Project’s own office, not including the wider community of entrepreneurs, had been cut by 30 percent — 30 people lost their jobs.

The fact that Factorli couldn’t be reformed and had to be killed is fascinating. Instead of adjusting it, the Project’s leaders scrapped it. As McCabe said, Hsieh’s attention is sometimes described as a laser beam. And this time, the beam moved away.

Later, I talked to some Factorli employees. The veteran manufacturing guy had quickly gotten another job. The young prototype builder was heading back to his hometown. Hsieh said he wasn’t involved with Factorli, and that I should ask someone else.

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