SF is back, and the data shows tech never really left

Reports of the death of San Francisco’s tech scene have been greatly exaggerated. We ran the numbers on where tech employees, new startups, and funding rounds are clustering, and SF is very much alive.

Highlights

• The SF Bay Area has by far the largest share of all tech employees in the U.S., with 49% of all big tech engineers and 27% of startup engineers. 
• The Bay Area’s share of tech engineers has been increasing since 2022 after declining since the industry-wide boom of the mid-2010s—long before the recent “SF is dead” narrative.
• SF is the home of startup formation. After a steady decline through the 2010s as tech geographically diversified, now more than half of all new startups in the prestigious Y Combinator startup accelerator are based in the SF Bay Area, and that percentage is growing extremely rapidly thanks to the AI boom in SF. 
• SF's declines in founders and tech employees are tiny compared to the exaggerated narrative. SF is still the #1 place for founders and tech employees despite a slight dip since 2021, from 13% to 12% of all top VC-backed founders, and a slight dip in top VC-funded SF-based companies’ employees living in SF, down to 52% from a peak of 56% in 2019.
• SF remains the home of early-stage startup fundraising. Now 26% of all Seed and Series A rounds done by top VCs go to Bay Area companies, far more than in any other market.
• SF's dominance in artificial intelligence and machine learning funding is even more pronounced, with the city growing its percentage of top VC Seed and Series A rounds in AI companies to 38%.

Not long ago, SF’s status as the center of the startup economy was largely unquestioned. With its access to the Bay Area’s unmatched pools of talent and venture capital, moving to SF was a rite of passage for would-be founders with unicorn ambitions, an almost soft prerequisite for hitting it big. 

However, around the time of the pandemic, a different narrative emerged about SF in particular and the Bay Area more broadly. The sudden ubiquity of remote work made founders and employees question the necessity of moving to a place with a notoriously high cost of living, plus plenty of civic safety and cleanliness issues. Showdowns with local governments and the rise of Zoom had many tech leaders suddenly uncertain about growing their Bay Area footprint. 

Prominent VCs decamped to Miami and Los Angeles; Elon Musk moved Tesla headquarters to Austin (and now plans to bring Twitter/X HQ to Texas, too); companies like Square, Uber, and Airbnb declared plans to scale back their SF presences as office vacancies soared and commercial rents plummeted. All this looked to signal a shifting zeitgeist, where SF occupied a less central place in the tech ecosystem. 

The data, however, tells a more nuanced and optimistic story for the Bay. Using SignalFire's in-house AI data platform, Beacon, we took a look at whether SF ever lost its crown through the lens of where founders, employees, funding, and companies moved—or didn’t.

We found that anecdotes about the decline of tech in San Francisco are overstated. SF still dominates all other U.S. cities when it comes to concentrations of tech talent and capital, and its lead is even larger when it comes to the recent AI boom. Meanwhile, crime is declining, the mayor is working to enliven downtown, calendars are full of AI-focused community events even if giant conferences are shrinking, and there’s a resounding sentiment among young founders that SF is the center of the tech universe again.

That said, the headwinds are real, especially outside of tech. Many remain priced out of housing, weak public schools push away families, and neighborhoods like the Tenderloin and mid-market feel downright dystopian. Within tech, other cities are growing employee headcounts faster than SF on a percentage basis as the startup scenes in New York and Austin mature. 

Yet SF remains far in front across multiple tech metrics, and its reign looks unlikely to be challenged any time soon.

Where startup employees live

To start, we looked at where people whom you might call tech employees indicate they reside on their public profiles. “Tech” can be a nebulous category with shifting boundaries, but here, we consider the population of U.S.-based engineers working at startups funded by top-tier VCs and the top 10 public tech companies by market capitalization.

Though the SF Bay Area (which we define as including Oakland, Berkeley, the Silicon Valley peninsula, and San Jose) has grown more slowly than other markets in the wake of the pandemic, its share of startup and big tech engineers still greatly outstrips that of any other U.S. city. As of 2023, the Bay Area still boasts 49% of all big tech engineers and 27% of startup engineers. These shares are more than 4x and 2x those of runner-up Seattle, respectively.

We used Beacon’s job classifications to identify the subset of engineers in AI-related roles and found that SF’s share is similarly outsized at around 35%.

None of these leads are likely to be usurped in the foreseeable future. Other metros have gained ground over the last decade, but that convergence has been slow, and there are signs that it’s stalling. 

While SF’s share of startup engineers had been on a long-running declining trend, it stabilized in 2021 and ticked up modestly last year.

Meanwhile, its big tech engineer share also saw a reversal of post-pandemic losses and is now back at roughly 50%.

It’s true that other areas have seen faster relative growth since the pandemic. NYC and Austin saw the biggest gains in their startup headcount since 2019, with each clocking in more than 40% over their 2019 level. SF’s relative growth was just slightly under 20%, albeit on a much bigger base.   

What’s more, these and other cities are more popular destinations among tech workers relocating between tech jobs. Despite its overall job growth, SF saw a net exodus among this subset over the last year.

On the whole, though, no other city is on a trajectory to close the headcount gap, and SF’s regained momentum in the last two years puts that prospect even further out of sight. 

Where companies get founded and funded

While the stock of all tech employees might be slow to relocate, where new companies choose to headquarter could be a faster-shifting indicator of location preferences. 

Overall, the numbers tell a similar story: while the Bay Area’s share of funding rounds was in a slow declining trend that accelerated during the pandemic, it has rebounded in the last two years. No other city has come close to matching SF’s numbers. 

Let’s start with the earliest-stage companies. 

Y Combinator batches are an interesting subset here, being large enough to show meaningful trends and containing a historically outsized share of future unicorns.

The percentage of each Y Combinator batch based in the Bay Area was steadily declining since 2013 but came back sharply starting in 2022. YC companies indicating the San Francisco Bay Area as their location accounted for more than half of the whole Winter 2023 batch. Remarkably, this share is higher than it has been since 2014. This change is driven by AI startups in particular, which account for 36% of the whole W23 batch.

When SF’s share of YC companies fell at the start of the 2020s, it wasn’t other U.S. cities’ gain. That decline during the pandemic corresponded to a higher share of YC companies forming outside of the U.S. But as this international cohort has shrunk, the Bay Area has rebounded. When tech entrepreneurs come to America to build, the Bay Area remains their favorite destination.

SF’s persistence can also be seen in the Bay Area’s share of all companies raising Seed or Series A rounds from top VCs. While SF’s share of these rounds peaked in 2018, it still accounts for 26% of these rounds, a share that has started to trend upwards since 2022. No other city in the world comes close to this share of funded startups among this VC subset.

Meanwhile, SF’s embrace of AI offset the headwinds that pushed some startups out. The Bay Area’s share of top VC rounds in AI companies has increased in the last two years to levels previously seen in 2017, with a continuing steady uptick in absolute numbers. 

It’s important to note that our 2023 funding data is likely still incomplete as companies often delay announcements of their rounds, but we have no reason to suspect a geographic bias in which rounds have entered our data set.

Trends in top startups: Founders and employees 

While startup HQs might be located in SF, do founders and their teams take advantage of post-COVID Zoom culture to dial in from elsewhere? Some certainly moved to greener and cheaper pastures.

It’s hard to know exactly where someone might be located at any point in time, but here we look at the last location top VC-backed founders had publicly listed in a given year. SF’s share peaked in 2019 and dipped from then until 2022, but has since increased slightly. The absolute number of founders in SF peaked in 2022, but has only dropped from roughly 2,250 to 1,950 since.

Similarly, when we look at the percentage of Bay Area–based top VC-funded companies’ employees who actually live in the Bay Area, we see a peak in 2019 but only modest declines in the period since then from around 56% to 52%.

Both declined by less than 10%, though, so the sense of SF feeling hollowed out might be more that employees are staying home within the city instead of heading to offices and local lunch spots—but not leaving the Bay entirely.

While SignalFire’s in-house Beacon AI can reveal fascinating insights like the data above, its true purpose is to give our portfolio companies superpowers. It helps founders source extraordinary job candidates, combining an array of signals to identify which are open to new roles before they leave their company. Beacon can also use a company’s ideal customer profile to generate sales lead lists complete with contact information to accelerate their growth. Learn more here about how SignalFire is engineered to help. 

A city of builders

It’s great to see other markets flourish, developing their own ecosystems where exited founders become angels, seeding the next generation of startups. But while the data suggests that SF wavered for a few years, it never truly fell off. SF’s share of tech employees, new startups, and funding rounds has either seen only modest declines or returned to growth after a post-pandemic pause. Looking forward, the new AI gold rush has SF at its epicenter.

Perhaps it was mostly those with outsized voices and even larger tax bills to dodge that drove the narrative of SF as a ghost town. And few of them are writing aggrandized blog posts about slinking home to the Bay like they did when they left.

Despite the Bay Area’s well-publicized challenges, nowhere else are you as likely to overhear someone discussing their new open-source library or go-to-market strategy, all without a hint of shame. This monoculture might repel or incite rightful derision from some—it’s an easy punchline. 

Yet its fixation on catalyzing the future is what differentiates SF: an unabashedly nerdy place where the density of founders and the ubiquity of tech as a lifestyle mean you can learn to scale a startup through osmosis. Far from dead, the Bay remains the best place to build.