Is San Fransisco Still Worth it? (Part 1)
Hey everyone, welcome back to another week at Code Economics. Today, we’re exploring a hot topic in the tech community: Is San Francisco still worth it for tech professionals? This will be part 1 of a 3-part series diving into San Fransisco, what made it great, its issues, and whether you should move there as a tech professional.
This week we will cover what made San Francisco great in the first place, through a historical and modern lens.
The Rise of San Francisco as a Tech Hub
San Francisco’s journey to becoming a global tech hub is a story of innovation, entrepreneurship, and community. SF started as a city during the California gold rush around 1848–1855 when a surge of people, wealth, and entrepreneurial spirit came to the region. The city rapidly grew into a bustling economic center that was focused on shipping, fishing, and the center of the American west coast.
The 1900s
During and after World War II, the San Francisco Bay Area saw significant investment from defense and aerospace industries. Companies like Hewlett-Packard, founded in a Palo Alto garage in 1939, were early pioneers. Stanford University played a crucial role, in encouraging faculty and graduates to start their own companies.
In the 1950s, William Shockley, one of the transistor’s inventors, founded Shockley Semiconductor Laboratory in Mountain View. His employees, including Gordon Moore and Robert Noyce, would later leave to start Fairchild Semiconductor, a company instrumental in developing silicon-based semiconductors, leading to the nickname “Silicon Valley.”
The 1970s saw the birth of iconic companies like Apple, founded by Steve Jobs and Steve Wozniak in Cupertino. Their innovations in personal computing helped establish the region as a tech powerhouse. The 1970s led to the beginning of the Venture Capital industry as we know it with the rise of firms like Kleiner Perkins and Sequoia Capital funding many of the era’s most successful startups.
The 1990s brought the internet revolution, with companies like Netscape, Yahoo, and later Google (founded in 1998 in Menlo Park) leading the charge. This is when San Francisco became home to many dot-com companies, benefitting from its proximity to Silicon Valley.
The 2000s
The early 2000s was a turbulent time in SF due to the bust of the Dot Com Bubble. This led to the worst recession ever experienced in the tech industry to date, but from its ashes, we saw the rise of FAANG companies.
The Dot Com Bubble saw incredibly high price-to-earnings ratios and pre-revenue companies going public for billions of dollars.
The Social media wave in the mid-2000s contributed greatly to the shift from more southern parts of the Bay Area (Silicon Valley) to SF proper, with companies like Twitter and LinkedIn, that revolutionized social media and connected millions globally, established their base in San Francisco.
The big shift that led to the next wave of the startup boom was the rise of cloud computing with companies like Amazon Web Services (AWS) and Google Cloud Platform (GCP). This is probably the biggest development that led to the SaaS boom since it dramatically reduced the overhead cost of running a software business.
The 2010s-Present
Jim Cramer created the term “FAANG” to represent a basket of stocks he thought would perform well. To his credit, META 0.00%↑, AAPL 0.00%↑, AMZN 0.00%↑, NFLX 0.00%↑, and GOOG 0.00%↑ have performed spectacularly in the past 15 years — many of which have headquarters in the San Francisco Bay Area.
But it was not just these big tech companies that performed amazingly, the next generation of tech companies like Slack, Salesforce, Stripe, Square, Uber, etc all grew fast due to the low interest rate environment and the tremendous amount of venture capital in the Bay Area.
Despite representing less than half a percent of the US population, San Fransisco attracted an average of over 20% of Venture Capital in the US, and this doesn’t even include the South Bay adding another 20%.
This proved very important for San Fransisco because this next wave of tech companies had their main offices in SF proper, unlike the big tech companies in South Bay and the peninsula.
San Francisco has had a meteoric rise to the top as a tier 1 city in the United States despite a relatively short history compared to its peers out east, and its much smaller population.
What Makes SF Special Today?
History paints a picture of SF succeeding because it was an early West Coast settlement that happened to benefit greatly from being close to Silicon Valley. Even on its own, SF is a behemoth in the tech sector and it’s a small wonder every tech graduate in the US, if not the world, should consider living in the city for at least part of their lives.
Culture of Entrepreneurship
San Francisco’s culture of entrepreneurship is deeply ingrained and continues to drive the city’s status as a global tech hub. The city’s entrepreneurial spirit is evident in the high concentration of startups and the continuous emergence of innovative companies. This culture is supported by a robust ecosystem that includes accelerators, incubators, and co-working spaces that foster collaboration and idea exchange. Iconic tech events like TechCrunch Disrupt and the Startup Grind Global Conference take place in the city, bringing together entrepreneurs, investors, and industry leaders to share insights and network. SF has a huge concentration of “supporting” white-collar professionals who are critical to the success of startups. Here you will find lawyers and accountants taking equity instead of cash, or banks like Silicon Valley Bank (SVB, which is now part of JPM as of 2023) that will work with founders on very loose terms to allow them to build.
Access to Elite Tech Talent
San Francisco boasts unparalleled access to elite tech talent, attracting top-tier engineers, developers, and business minds. The proximity to prestigious universities like Stanford and UC Berkeley ensures a steady stream of highly skilled graduates entering the job market. Additionally, the city’s reputation as a leading tech hub draws experienced professionals from other regions and countries, creating a rich talent pool. Most tech giants like Google, Apple, Facebook (Meta), etc have a significant presence in the area, further enhancing the talent ecosystem. The concentration of top talent in SF creates a dynamic environment where knowledge sharing and innovation thrive, making it an ideal place for tech companies to recruit and retain the best minds. The fact that SF is in California which banned Non-Competes means that tech has a much more open culture of jumping from one firm to the next, which ensures that best practices spread like wildfire.
Ultimately, SF attracts a lot of young people who want to live in the Bay Area and work in tech because aside from all the Bay Area-wide benefits of being in the region for tech, SF is a real, dense city with lots of other young people, unlike the car-dependent suburbs found throughout the rest of the region (and the state).
Access to Venture Capital
San Francisco’s access to venture capital is a major factor in its continued success as a tech hub. The city is home to some of the world’s most influential venture capital firms, such as Sequoia, Andreessen Horowitz, and Benchmark. It is only a moderate drive away from Sand Hill Road which gives access to so much Venture Capital. These firms provide critical funding that enables startups to scale rapidly and bring innovative products to market.
The proximity of venture capitalists to tech companies fosters strong relationships and mentorship opportunities, further supporting the growth and development of startups. San Francisco’s venture capital ecosystem is known for its willingness to take risks on groundbreaking ideas, which has led to the success of many iconic tech companies. This robust funding environment ensures that entrepreneurs have the resources needed to turn their visions into reality.
Quality of Life
This last one is not related to tech, but it is something every city that wants to compete for talent must provide its residents. San Francisco offers a high quality of life. The city is renowned for its scenic beauty, with iconic landmarks like the Golden Gate Bridge, rolling hills, and waterfront views. A mild 1-season climate allows for year-round outdoor activities, from hiking in nearby national parks to enjoying the city’s many parks and beaches. Despite its size, SF has a world-class dining scene, art scene, and numerous cultural festivals. The city’s commitment to sustainability and green initiatives enhances the quality of life for its residents. Despite challenges such as high living costs and housing affordability, San Francisco continues to be a desirable place to live and work, offering a unique blend of urban excitement and natural beauty.
Conclusion
San Fransisco is a beautiful city, with an incredible history of technology innovation. It’s a small wonder when you look at this chart we see that the San Fransisco Bay Area is considered the best region for startups in the world:
Source: Statistica
Suppose you had to boil down what makes San Fransisco successful. In that case, it is the proximity to Silicon Valley combined with the fact that it was heavily urbanized before the development of the car, resulting in a much denser and more walkable environment compared to almost any of its other Bay Area counterparts. Walkability and density will keep moving the next generation of young talent into the city over the surrounding environment.
Next week we will explore the impact of COVID-19 along with policy decisions that shaped San Fransisco. So stay tuned for more!
In case you missed it, last week I did a recap on current trends in SaaS companies after their public earnings as well as a breakdown on what are the key metrics you need to consider when evaluating these companies:
Other Big News this week:
- Computex 2024 Highlights: Intel introduced its new Lunar Lake series chips with enhanced AI capabilities, while Qualcomm’s Snapdragon X Elite chip showed impressive performance. MSI unveiled the first AI gaming monitor (TechRadar 1) (TechRadar 2).
- Apple’s WWDC 2024 Announcements: At WWDC 2024, Apple launched “Apple Intelligence,” a suite of AI tools, and updated various operating systems including iOS 18 and macOS Sequoia (Blue Tech Wave Media).
- Nvidia’s Market Milestone: Nvidia’s market value has reached $3 trillion, surpassing Apple, driven by high demand for its AI and graphics processing technologies (Blue Tech Wave Media).
- 2024 Data Breaches: Significant breaches included Cash App affecting 8.2 million customers and Emma Sleep’s targeted attack compromising credit card data, highlighting ongoing cybersecurity challenges (Tech.co).
- London Tech Week 2024: This event gathered tech leaders to discuss AI, sustainability, and leadership, emphasizing collaboration to drive innovation and address global challenges (London Tech Week 2024).
