In November, owners of Work in Progress, a popular downtown collaborative workspace that houses several tech startups, began conversations about the future. It was year three and despite having tenants in nearly all six of its rentable rooms, the business was losing money. A decision was made to look for a buyer.
Work in Progress opened in 2013 as a subsidiary of VTF Capital, formerly known as VegasTechFund, the venture arm of Zappos CEO Tony Hsieh’s $350 million expenditure to launch the Downtown Project. The fund was initially formed to support the Las Vegas tech community and attract companies here and a co-working space seemed a logical extension. The thinking at the time: the fund could afford a small hit if at the same time, it provided some of its companies with an affordable alternative to renting an office.
"It made sense as part of our portfolio,” said Zach Ware, a managing partner for VTF Capital.
Three years later, keeping Work in Progress in the fund was making less sense. VTF Capital had evolved and was making the majority of its investments outside of Las Vegas. It was also looking to rebrand and focus on commerce companies. Questions were raised about whether Work in Progress aligned with that mission.
And unlike other co-working spaces, backed by other revenue sources that allow it to host events and other nonrevenue activities, Work in Progress sought to do the same with monthly dues ranging from $49 to $299.
“The economics were just really challenging,” Ware said.
But VTF Capital, a part of the Downtown Project, wanted Work in Progress to remain a co-working space. So the fund began looking for buyers in the area who were committed to keeping a collaborative environment. After several months, it had struck out and told tenants in February that it would close its doors March 31.
That’s when Let’s Rally, a Las Vegas-based digital marketing agency, expressed interest in taking it over. The management for Work in Progress reached a deal with Let’s Rally and told its tenants that it would not be shutting down. Let’s Rally is still finalizing its plans for Work in Progress, but Allen Vance, who runs the digital advertising firm said the company is “excited to re-energize and realize the value associated with the original purpose of Work in Progress.” Under Let’s Rally, the business will remain a co-working space.
And in a letter to tenants, the firm alluded to broadening Work in Progress’ influence beyond downtown.
“We believe in trying new things, supporting ideas, and fostering relationships,” the message reads. “Work in Progress is the place for these shared beliefs, not just downtown, but in the larger Las Vegas community.”
Work in Progress will be a part of Let’s Rally’s product development arm, 5895 Labs. It is involved with several local projects, including Entity Wagering, which is expected to launch with NCAA basketball's March Madness. Entity Wagering will help allow investors to pool money and place wagers in sports books, according to the website. The company says its team has years of experience in the gaming industry.
Unlike the majority of the Downtown Project’s small businesses — restaurants like Carson Kitchen or EAT — Work in Progress fell under VTF Capital, the venture arm. Going forward, the workspace will no longer be affiliated with the Downtown Project. Mark Rowland, who oversees the small businesses as CEO of DTP Ventures, said he is pleased to see investments in the area that are not backed by the Downtown Project.
"I really hope these guys take the Work in Progress space and have a really great business come out of it. We can’t have everything downtown be funded by (the Downtown Project),” Rowland said.
Why Work in Progress was not able to become profitable has been attributed to several factors. The space included a mix of options for tenants, ranging from desk space to closed offices. But the management has long conceded that early on, it should have constructed more offices. Startups are often attracted to co-working spaces, rather than other options like coffee shops, because they can have an office for meetings.
The workspace also only had one primary source of revenue: monthly rental fees. Other successful co-working spaces can be more flexible and offer perks, like event programming, if they are backed by a broader company, Ware said. He cited local data company Switch, which runs the Innevation Center.
Large co-working companies, like WeWork, which has 78 locations in 23 cities, have the advantage of scale.
Quentin Abramo, who runs Co-Operate on Main, another space in the Arts District near Work in Progress, said that flexibility is crucial. "It’s the space you create that affords you the ability to be successful,” he said.
Abramo said he is able to tailor the space to what a company needs throughout the time that it is renting. They can create larger offices by removing a wall or move tenants around to meet their specific needs.
Another factor could be competition and the other options available for the kind of entrepreneurs Work in Progress targeted. The market for workspaces in Las Vegas, while growing, is fairly crowded. In addition to Work in Progress, the Innevation Center and Co-Operate on Main, startups can rent office space from the Emergency Arts building downtown or from national office providers like Regus and Intelligent Office, which offer a range of options that include co-working.
Another option is working out of a coffee shop. Near Work in Progress are two — PublicUs and The Beat Coffeehouse & Records — spots where coffee drinkers can often be seen working from their laptops.
The space is competitive but there appears to be demand. Co-Operate on Main has a wait list, an overflow space and plans to expand to another location. Downtown Project recently renovated an office in its downtown headquarters to a co-working space with six rooms. It has already leased several of them.
"I think there’s demand for what we currently have available,” Rowland said.