The AI Boom Is Pulling Tech Entrepreneurs Back to San Francisco

Life was idyllic for Doug Flopp and Jesse Fisher in Bend, Oregon. The couple moved there last year and work remotely from a 2,400-square-foot house surrounded by trees, with easy access to skiing, mountain biking, and a brewery. It’s an upgrade from a previous apartment in San Francisco, where a stranger broke into Mr. Flopp’s home because it wasn’t locked properly.

But the two tech entrepreneurs are now on their way back to the Bay Area, fueled by a key development: the artificial intelligence boom.

Both Flopp and Fisher are starting companies using AI technology and are looking for co-founders. They tried to get by in Bend, but the eight-hour drive to San Francisco for hackathons, networking events, and conferences was too much for him, so he decided to go back in August when his lease ended.

“The AI ​​boom has brought the energy lost in the Covid-19 back to the Gulf,” said Flopp, 34.

The couple are part of a growing group of boomerang entrepreneurs who see an opportunity in San Francisco’s predicted demise. For more than a year, the tech industry has suffered its worst downturn in a decade, with job cuts and a plethora of vacant offices. The pandemic has also triggered a wave of migration to places with lower taxes, fewer COVID-19 restrictions, safer streets and more space. And tech workers are one of the most vocal groups criticizing the city for worsening problems like drugs, housing and crime.

But that downturn is almost always followed by another boom. And with the latest wave of AI technology known as generative AI, which generates text, images, and videos in response to prompts, there are just too many dangers to overlook.

investors are already announced Funding for generative AI startups reached $10.7 billion in the first three months of this year, a 13-fold increase from the previous year, according to Pitchbook, which tracks startups. Tens of thousands of tech workers recently laid off by big tech companies are now eager to join the next big undertaking. Additionally, much of AI technology is open source. In other words, allowing companies to share their work and allow anyone to build on it fosters a sense of community.

San Francisco’s Hayes Valley neighborhood, known as ‘Cerebral Valley’ because it’s the heart of the AI ​​scene, has spawned a ‘hacker house’ where people build startups. And every night someone hosts a tech-focused hackathon, meetup, or demo.

In March, just days after prominent startup OpenAI unveiled a new version of its AI technology, it said:emergency hackathonHosted by two entrepreneurs, the event attracted 200 attendees, with about the same number of attendees on the waiting list. In the same month, at a networking event hurriedly planned on Twitter by Clement Delang, CEO of AI startup Hugging Face, Attracted More than 5,000 people and two alpacas gathered at San Francisco’s Exploratorium Museum, earning it the nickname “Woodstock for AI.”

Madison Taylor, who runs Hugging Face and organized the event with DeLang, said the communal vibe mirrored that of Woodstock. “Peace, love, building cool AI,” she said.

Taken together, this activity is enough to attract people like Fisher who are looking to start AI-powered companies in the hospitality industry. She and Flopp joined her 350-person tech industry in Bend, but missed the inspiration, the hustle and bustle, and the connections of San Francisco.

“There’s no other place like the Bay,” said 32-year-old Fisher.

Jen Yip, who has hosted events for tech workers for the past six years, said San Francisco’s tech scene, which was quiet during the pandemic, began to change last year alongside the AI ​​boom. At nightly hackathons and demo days, she watched people meet co-founders, secure investments, acquire customers, and network with potential candidates.

“I’ve seen people come to an event with an idea they want to test and pitch it to 30 different people in one night,” she said.

Yip, 42, runs a secret group of 800 people focused on AI and robotics called the Society of Artificers. The monthly events are popular and often sell out within an hour. “People definitely try to crash,” she says.

In another of her talk series, Founders You Should Know, AI company leaders speak to an audience of mostly engineers looking for their next job. According to Yip, more than 2,000 people applied for 120 slots at the last event.

Bernardo Acetuno He moved his company Stack AI to San Francisco in January and became part of startup accelerator Y Combinator. He and his co-founders had planned to base the company in New York after the three-month program, but he decided to stay in San Francisco. The community of fellow entrepreneurs, investors and tech talent they found was invaluable, he said.

“If we move, it will be very difficult to replicate it in other cities,” said 27-year-old Acetuno. “What you are looking for is already here.”

After operating remotely for several years, Y Combinator began encouraging startups participating in the program to relocate to San Francisco. Of the 270 startups that recently joined, 86% were local, according to the company.

“Hays Valley has truly become a celebral valley this year,” Y Combinator CEO Gary Tan said at Demo Day in April.

The AI ​​boom is also bringing back founders of other types of technology companies. Financial technology startup Brex declared itself “remote first” early in the pandemic, closing its 250-employee office in San Francisco’s SOMA district. The company’s founders, Enrique Dubuglas and Pedro Franceschi, have retired to Los Angeles.

But when generative AI started to gain popularity last year, Douglas, 27, became keenly interested in how Brex could adopt the technology. He quickly realized he was missing coffee, casual conversation, and the AI-related community in San Francisco, he said.

In May, Douglas moved to Palo Alto, Calif., and began working in a new, stripped-down office a few blocks from Brex’s old office. Due to high office vacancy in San Francisco, the company paid a quarter of what it was paying before the pandemic.

Sitting under a neon sign reading “Growth Mindset” in Brex’s office, Doveglass said he has been having regular coffee meetings with people working on AI since his return. He accepted his doctorate from Stanford University. A student who tutors him on the subject.

“Knowledge is concentrated at the cutting edge,” he said.

Flopp and Fisher said they miss life in Bend, where they can ski and mountain bike on their lunch breaks. But getting two startups off the ground requires both urgency and focus.

In the Bay Area, Fisher attends multi-day events where people stay up all night working on projects. And every time Mr. Flopp passes by a coffee shop, he runs into an engineer or investor he knows. They are considering living not only in San Francisco, but also in suburbs such as Palo Alto and Woodside, where they have access to nature.

“I am willing to sacrifice the amazing tranquility of this place for the chance to meet and know there are so many wonderful people who share, inspire, and work with its ambitions,” Flop said. said Mr. Living in Bend “felt like an early retirement, to be honest,” he added.

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