According to data and founders who moved elsewhere, running a startup in San Francisco really is a better option in 2024

The AI ​​startup boom in San Francisco is so big that even international founders who don’t run AI startups are moving there to grow their businesses, according to some founders who recently moved to the city.

That’s largely because tech talent and investor money are still overwhelmingly concentrated in the sector, according to new data that VC firm SignalFire exclusively shared with TechCrunch.

The San Francisco Bay Area still has by far the largest share of all tech workers in the U.S., with 49% of all big tech engineers and 27% of startup engineers, according to data from SignalFire’s Beacon platform. SignalFire, which prides itself on big-data analytics, also sees the Bay Area’s share of tech engineers growing (not shrinking) as of 2022, with its share of that talent pool being more than 4x and 2x larger, respectively, than second-place Seattle. The area is home to 12% of all top VC-backed founders and 52% of startup workers, more than any other region.

SignalFire partner (and former TechCrunch reporter) Josh Constine’s analysis prompted him to declare in a recent blog post , “We found that the anecdotes about San Francisco’s tech decline are exaggerated. SF still dominates all other U.S. cities when it comes to the concentration of talent and tech capital, and its lead is even greater when it comes to the recent AI boom.”

Unify founder moves out of Berlin after raising $8 million

Take London native Daniel Lenton, founder of Unify, originally based in Berlin. Unify, a Y Combinator W23 graduate, is building a neural router that automatically sends personalized prompts to the best LLM for the job. It helps companies control costs by using models from multiple AI sources.

Lenton, who raised $8 million for Unify from SignalFire, Microsoft’s M12 Capital and Ronny Conway’s A.Capital Ventures, had no problem meeting with Silicon Valley investors while he was in Berlin, he said. He even spoke with giant companies.

“For me, it wasn’t a big deal to talk to companies like Andreessen, Sequoia and Accel,” he said. “You’re not excluded from the investment market when you’re not there. You can do a lot of things remotely. Even meet new people.”

But after his YC experience, he returned to San Francisco and met clients, prospects, partners, and colleagues every time. The reason for the move was a month-long visit in June.

“In just one week, every day of that week, I had lunch in different offices” of other larger AI tech startups, he says. “Around a whiteboard, brainstorming together.”

There are countless other, more formal events. It’s not just Cerebral Valley, a San Francisco neighborhood with a collection of AI startups and a thriving social scene for the many young 20-somethings who work for them, although that’s part of the attraction. It’s also investor dinners and events, like the recent Andreessen Horowitz AI Founders Event that Lenton attended. “It’s just really, really useful.”

Even though Lenton moved himself and made San Francisco the official headquarters of his startup, he did not require his eight-person team, living in each city, to go with him.

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’s moving herself and her company’s headquarters from Paris to San Francisco—even though Paris is a European hub for AI startups with groundbreaking startups like Mistral. Because Lago is also a YC (S21) alum and is based in the US, moving to the US was always her plan, she says. But the plan was to move to New York, because of the ease of travel and the time zone.

“A year ago, everyone was moving from SF to New York and saying SF was dead,” she told TechCrunch. But then she spent May in San Francisco on business, “and I see everyone’s come back.”

He’s not the only one who’s noticed and said it. Jason Lemkin, founder of SaaStr, a community for business software startups known for its events, this week published on X, “So I moved back to the SF Bay Area full time. As did, often quietly, many leaders and executives I’ve known for years.”

Lemkin explains that the area is “clearly the center of the AI ​​boom, even if a lot of it is based outside of it, in Paris and elsewhere. Like others, he credits YC and other accelerators with bringing startups to the city. “The Bay Area is back.”

For Chuong, choosing San Francisco came down to how much easier it was for her to build a company there. Lago isn’t an AI company, but it counts them as customers. It offers what it calls an open-source alternative to Stripe, focusing on usage-based metering and billing. Lago has raised a total of $22 million to date, she says, from a mix of angel investors and VCs like SignalFire and FirstMark.

Lago’s clients are largely cloud startups, including many AI startups. She grew the company through word-of-mouth, inbound requests, many of which came from Bay Area companies. As she looks for her first marketing hires, “we feel like the talent pool is better. And the customer pool is better” in San Francisco than anywhere else, she said.

Manufactured happiness

Chuong also credits YC with making San Francisco such a hub, specifically hosting a range of events from alumni meetups to AI founder happy hours, in addition to the formal events it hosts with current cohorts and its alumni-only social network, Bookface.

But every city has a ton of events, meetups, and people to hire. Both these founders and SignalFire’s data point to something else the Bay Area offers—especially in San Francisco: serendipitous connections.

When so many people from the same industry are crammed into tight spaces, bumping into someone useful becomes the norm, not the rarity. Chuong says she met three other YC founders working on similar companies in the SoMa building where she was temporarily living. “We just started collaborating on what we were building, on our challenges, and it was super organic. And I felt like there was so much support here that it didn’t make sense to go to New York.”

That’s not to say that startups built elsewhere in the country or the world can’t succeed. Many do. But as Y Combinator partner Diana Hu put it in a recent podcast, people are making the move because they feel like “San Francisco is the place in the world where you can manufacture happiness.”