Which doom run? With AI, a “spirit of optimism” is returning to San Francisco startups

(Luis Sinco/Los Angeles Times)

Which doom run? With AI, a “spirit of optimism” is returning to San Francisco startups

California politics, artificial intelligence, homepage news

Hannah Wiley

January 16, 2024

Far from the palm trees of Miami or the taco trucks of Austin, Catalin Voss has the headquarters of his literacy start-up between a cannabis club and a pawn shop

in the heart of the mission district.

Voss leases a nondescript office building in one of San Francisco’s most vibrant neighborhoods as home base for Ello, a company he co-founded in 2020 that uses speech recognition technology powered by artificial intelligence to help struggling students develop their reading skills. The office is within walking distance of his Noe Valley apartment and just steps from some of the city’s best taquerias and cocktail bars. And those are just a few of the benefits he mentioned when explaining why he did it


headquartered in San Francisco.

Doom loop be damned.

Voss is part of a sizable group of San Francisco loyalists, old and new, who say they are confused by the “all is lost” narrative promoted by conservative media hosts and more recently a vocal contingent of tech leaders, including billionaire entrepreneur and agitator Elon. Musk.

The naysayers portray San Francisco as a city in decline, in Musk’s words, “an abandoned city.” zombie apocalypse” ruined by liberal policies that allowed street crime and illegal drug use to fester. In a November debate with Gov. Gavin Newsom, GOP presidential hopeful and governor of Florida. Ron DeSantis invoked the city’s fame several times, at one point holding up a “poop map” of human feces polluting the streets of San Francisco.

Voss, on the other hand, says San Francisco is still the “it” city for innovation and opportunity in the tech industry.

“There’s no better place to do this than in SF,” said Voss, sitting in a small conference room in Ello’s apartment-style office, just around the corner from OpenAI’s headquarters.

“If you want to be the best in the world at finance, you move to New York. If you want to be the best in the world at acting, you move to LA. If you want to be the best in the world at technology, you move to San Francisco ,” said Voss, a native of Germany.

Several tech leaders interviewed have spent decades in Silicon Valley, others are newcomers to the region and argue that San Francisco and the broader Bay Area remain a nerve-wracking hub of talent, institutional knowledge and abundant venture capital. They say emerging tech hubs think Nashville, Miami and Austin don’t really compare.

Instead, they argue, cycling through peaks and valleys is just a natural part of San Francisco’s rhythms. And while they acknowledge the economic hit the COVID-19 pandemic has caused as tech companies traded downtown offices for remote work, they see the next boom in the industry around artificial intelligence.

“It feels like a very optimistic and exciting moment,” says Angela Hoover, who recently moved her AI search chatbot company Andi from Miami to San Francisco. “People want to be in San Francisco, and the people on my team who live here fall in love with the city.”

Moving from the East Coast to the West Coast was like “rocket fuel” for Andi, Hoover said. She has found an abundance of AI leaders eager to provide feedback and collaborate on ideas.

Some key data points also define the view of a region in decline. The Bay Area retained its national top spot in venture capital investment last year, followed by Boston and New York, according to an October report from Ernst and Young, buoyed in part by investments in artificial intelligence.

And while California as a whole has lost roughly 37,200 people since July 2022, San Francisco and other Bay Area counties saw a net gain of thousands of residents, according to the Treasury Department. And San Francisco’s unaffordable home prices have fallen over the past year, a trend expected to continue into 2024.

“I have seen a gradual return of optimism over the past six months,” said Homa Bahrami, associate professor at UC Berkeley’s Haas School of Business. “Every day you hear about another layoff, another layoff, another layoff. But at the same time, you also see this new startup being founded, this new startup being acquired, and venture capital coming into this space.”

Bahrami attributes the Bay Area’s status in the tech industry to the tangible resources, including education, mentorship and funding, that


“hard for other places to emulate.”

The region’s many elite schools, including Berkeley and Stanford, are nurturing the next generation of startups and executives. Dozens of retired CEOs are readily available to mentor younger leaders, and venture capital financing is more easily accessible than in many of the newer tech hubs.

“The Bay Area is a global ecosystem,” Bahrami said. “It’s not just an American ecosystem.”

Still, Bahrami urged caution in not looking too much into the early signs of the next ‘boom’.

“I would use the word ‘paradox,’” Bahrami said. “I think we are transitioning the world from the pandemic era to the post-pandemic era. But we’re not quite there yet.’

And Bahrami noticed


“dark clouds”


still loom, including inflation, geopolitical challenges and the struggles San Francisco faces in revitalizing its post-pandemic downtown.

According to the city’s chief economist, Ted Egan, San Francisco’s office vacancy rate now exceeds 30%. Only 43% of workers are returning to the office at pre-COVID levels, and that’s bad news for restaurants and retail stores.

“Downtown was a pretty rich ecosystem before the pandemic. But the core of it was people coming to work in offices,” Egan said. “Until you get that back, it’s going to be difficult to restart a positive dynamic flywheel in the downtown area.”

Even San Francisco’s defenders acknowledge that the pandemic exodus has been a blow. In recent years, tech giants had taken over large parts of downtown, erecting shiny new towers that employed thousands of workers who needed places to eat, drink, shop and live.

After COVID hit and tech companies allowed people to work from home, it was only a matter of time before “home” became another city and then another state, with cheaper rents, fewer homeless encampments, and less property crime. Many technology leaders followed suit and realized they could raise money and run a business in states with lower tax rates.

It is not that Voss does not see any problems. It’s that he thinks San Francisco is thriving despite them.

“I experience it as noise in the background,” he said.

Voss said Ello employs about 35 people, with satellite offices in New York and Nairobi. The company recently raised $15 million in Series A funding, and Voss said he persuaded a well-known machine learning engineer to move to San Francisco from China.

“If you’re that person who is that ambitious and wants to be the best in the world at what you do, I don’t think you’re going to give San Francisco a second look because of what Fox News says,” Vos said.

Russell Hancock, president and CEO of the think tank Joint Venture Silicon Valley, agreed, saying most people in the tech world disagree with the narrative that San Francisco has somehow lost its appeal.


“San Francisco is vibrant. It’s a beautiful city,” said Hancock. “There’s a reason why it’s attractive. And let’s never forget that part of the appeal is that it’s quirky and wacky and progressive.”

Hancock doesn’t see the development of other cities as technology centers as a bad thing.


arguing that the changing dynamics could ease pressure on the Bay Area’s infrastructure and dampen housing prices.

But as artificial intelligence takes hold, San Francisco has an advantage over other regions, Hancock said.

“That’s how it goes in Silicon Valley,” he said. “These things come in waves. And this seems to be the next wave. And it seems to be real.”

A big part of San Francisco’s enduring appeal for technology is that it’s in the city’s DNA to be a “tolerant place,” according to Peter Leyden, a Bay Area entrepreneur and most recently the founder of Reinvent Futures, a company that helps bring together top companies. leaders in artificial intelligence.

In Silicon Valley, Leyden says, failing at one company is virtually a requirement to gain access to the capital and credentials needed to succeed at another. While the right-wing and libertarian “crypto squad” fled to red states during the pandemic, he said, the old guard stayed put, confident that San Francisco would rise again.

“The thing is, every place has its problems, and so do we, but the narrative out there is just wrong,” Leyden said. “Because there really is nothing like San Francisco.”


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