Tony Hsieh, Zappos CEO and founder of the ambitious startup-city development Downtown Project in Las Vegas, stepped down as leader of the project a few weeks ago, sources close to the matter told Re/code, which has been running a multi-part series on the venture.
Hsieh’s move comes as the project has laid off about 30 percent of its staff, or 30 people, which does not include the community of entrepreneurs funded by the project, these people said. Representatives of the project declined to comment. Hsieh did not comment on the details of his role, but said in an email that he never considered himself the “CEO” of the Downtown Project.
In a surprise all-hands meeting at the Inspire Theater a few weeks ago, Hsieh, whose $350 million in funding and vision turned 60 acres of Downtown Las Vegas into a growing tech city, told his staff he was stepping down and handing the reins over to his lawyer, Millie Chou. On Tuesday, the project laid off 30 percent of the staff.
News of the layoffs was first reported by KNPR News.
“[Hsieh] said, ‘I see myself as adviser and investor, but I’m going to appoint someone as our strategy implementation lead,'” one source who attended the meeting said.
Another person close to Downtown Project said the new businesses — like an artisanal doughnut shop and a high-end flower vendor — were “bleeding money.”
“It seems like it’s being run by kids — that’s because it’s being run by kids,” one source said about the Downtown Project.
This person cited Hsieh’s hiring decisions, which included several family members, as a problem.
“There are a lot of people in leadership at Downtown Project who have absolutely no business being there,” the source said. “Tony is not always altogether the most wise judge of character. There’s a lot of family. There’s a lot of drinking buddies. And some poor choices were made.”
David Gould, a prominent entrepreneur within the community, who was inspired by Hsieh’s charisma and ideas to leave his job as a professor in the University of Iowa and move to Las Vegas earlier this year, wrote an open letter to Hsieh, published today in Las Vegas Weekly:
Some 400–600 people pilgrimage to Las Vegas each month to walk your 19-block footprint, and ponder the ideal that simply focusing on ROI (Return on Investment) is not enough. You claimed that the city of the future would require equal attention on ROC (Return on Community), and I intuitively knew you were right. Though I have come to understand the formidable challenges inherent in transforming a city, the story you crafted was not only visionary, but attainable.
So what happened?
Update: Second paragraph clarifies the 30 percent figure does not include the community of entrepreneurs funded by the project.
This article originally appeared on Recode.net.