San Francisco's AI startup boom is so big that even international founders who aren't running AI startups are relocating to San Francisco to help grow their companies, according to several founders who recently moved there.
That's mainly because tech talent and investor dollars remain overwhelmingly concentrated there, according to new data provided exclusively to TechCrunch by venture capital firm SignalFire.
According to data from SignalFire's Beacon platform, the San Francisco Bay Area maintains a commanding share of the total tech workforce in the U.S., accounting for 49% of large tech engineers and 27% of startup engineers. SignalFire, which boasts big data-driven analytics, sees the Bay Area's share of tech engineers trending upward (not downward) from 2022 onwards, with its share of this talent pool being more than four times that of second-place Seattle. The region is home to 12% of the largest venture-backed founders and 52% of startup employees, more than any other region.
Analysis by SignalFire partner (and former TechCrunch reporter) Josh Constine led him to declare in a recent blog post that “we find that anecdotes about San Francisco's tech decline are exaggerated. When it comes to concentration of tech talent and capital, San Francisco still dwarfs every other U.S. city, and its lead is even larger when it comes to the recent AI boom.”
Unifi founders relocate from Berlin after raising $8 million
Take Daniel Lenton, a London native and founder of Unify, originally based in Berlin. A Y Combinator '23 alumnus, Unify is building a neural router that automatically sends personalized prompts to law masters students best suited for the task. The company says the router helps companies use models from multiple AI sources while still managing costs.
Renton, who has raised $8 million for Unify from SignalFire, Microsoft's M12 Capital and Ronnie Conway's A.Capital Ventures, said he had no problem meeting with Silicon Valley investors during his time in Berlin, and he's spoken to some big companies, too.
“It wasn't too much of a stretch for me to talk to firms like Andreessen, Sequoia or Accel,” he says. “You're not shut out of the investment market just because you're not there. You can do a lot remotely and even get introductions.”
But after his experience at YC, he returned to San Francisco, where he met customers, potential customers, partners, and collaborators every time he went there. It was a month-long stay there in June that made him decide to move.
“Just for a week, every day of the week, we were having lunch at different offices of other big AI tech startups,” he says. “We were sitting at whiteboards and brainstorming together.”
There are countless other, more formal events, too, not just because San Francisco's “Cerebral” Valley neighborhood is home to AI startups and the burgeoning social scene for the many 20-somethings who work there, although that's part of the appeal, of course. Investor dinners and events are also part of the draw, such as an Andreessen Horowitz event for AI founders that Lenton recently attended. “It's just so helpful.”
Renton relocated himself and made San Francisco the official headquarters for his startup, but didn't ask his eight team members, who all live in different cities, to come along.
Lago moved to San Francisco instead of New York.
Anh-Tho Chuong, co-founder and CEO of open source billing platform Lago, shares a similar sentiment. She is relocating her headquarters and company from Paris to San Francisco, the epicenter of European AI startup activity with breakout startups like Mistral. As Lago is a YC alum (S21) and US-incorporated, she says moving to the US was always planned. But for ease of travel and time zone reasons, she initially planned to go to New York.
“A year ago, everyone was moving from San Francisco to New York and people were saying San Francisco was dead,” she told TechCrunch, but then she spent May there for work and “I saw that everyone was coming back.”
She's not the only one to have noticed and spoken out about this. Jason Lemkin, founder of SaaStr, a community of business software startups known for its events, said: Posted in X this week, “So I've moved back to the San Francisco Bay Area almost full time, and a lot of the leaders and executives that I've known for years are also quietly moving back.”
The area is “clearly the epicenter of the AI boom, even though a lot of people are based in other places, like Paris,” Lemkin explains. Like others, he's grateful to YC and other accelerators for bringing startups to the city. “The San Francisco Bay Area is back,” he says.
For Truong, he chose San Francisco because of how much easier it would be to start a company there. Lago is not an AI company, but it has AI companies as clients. The company offers what it calls an open-source alternative to Stripe, with a focus on metering and usage-based billing. Lago has raised a total of $22 million to date from a number of angel investors and venture capitalists, including SignalFire and FirstMark, Truong said.
Lago's clients are primarily cloud startups, including many AI startups. He has grown the company through word of mouth and inbound requests, many of which came from companies in the Bay Area. When it came to hiring its first marketing talent, Lago said, “I feel like San Francisco has a bigger talent pool than anywhere else. And the client pool is bigger.”
A lucky break
Truong also credits YC with making San Francisco such a hub, particularly with hosting ongoing events ranging from alumni get-togethers to AI founder happy hours. This is in addition to formal events with current alumni and the alumni-only social network, Bookface.
But every city has plenty of events, meetups, and hireable talent. These founders and SignalFire's data point to something else the Bay Area, and San Francisco in particular, has to offer: serendipitous connections.
In a small concentration of people in your industry, it's not uncommon, even normal, to run into helpful people. Truong says he met three other YC founders working at similar companies in a building in San Francisco's SoMa district where he was temporarily living. “We just started collaborating on what we were building and the challenges, and it all happened very organically. There's such a strong support system here that it felt like there was no point in going to New York.”
This isn't to say that startups founded elsewhere in the country or the world can't be successful — there are plenty that are — but as Y Combinator partner Diana Hu said in a recent podcast, people choose to relocate because they feel “San Francisco is the place in the world where you can manufacture your fortune.”