For all the talk in recent years about San Francisco losing its competitive edge in the technology and startup space amid the rise of rival innovation hubs, The City appeared to be as dominant as ever in 2024.
San Francisco-based startups attracted nearly one in four venture dollars invested in the U.S. last year, the highest portion of the industry pie since at least 2016, according to new data from PitchBook and the National Venture Capital Association.
Overall, venture capitalists invested more than $50 billion last year in San Francisco companies — ones based in The City itself, not in the broader Bay Area. That was the second-highest tally ever and up about 43% from 2023, according to the groups.
The surge in investment into city startups is largely due to the rise of the artificial-intelligence industry, venture experts say. The City is home to not only some of the biggest and best-funded AI companies, but also a broader and burgeoning AI startup scene.
“San Francisco is clearly the epicenter of the AI technology revolution,” said Pete Flint, a general partner at NFX, a venture firm based in The City.
Last year, venture capitalists invested $50.5 billion in San Francisco startups, up from $35.4 billion a year earlier, according to PitchBook. In 2024, 24.2% of all venture capital invested in the nation went to city-based companies, up from 21.8% the year before.
By contrast, startups in the entire New York metropolitan area — the second-biggest recipient for venture dollars after the Bay Area — collectively raised $25.5 billion in 2024. Although that tally was up about 26% year-over-year, the New York metro area’s share of the U.S. venture pie shrank slightly to about 12.2%.
Much of the jump in venture funding into San Francisco was due to some gargantuan funding rounds for AI startups. Among the top 10 biggest venture deals nationwide last year, four went to San Francisco-based companies, including the two largest — the $10 billion funding round Databricks announced in December and the $6.6 billion one OpenAI closed in October .
Counting the two separate $4 billion rounds Anthropic raised last year, those three San Francisco startups together raised $24.6 billion in 2024, or nearly half of The City’s total.
A similar story played out nationwide last year, if not to the same degree. Eight of the 10 largest funding rounds across the nation went to AI-related startups. Collectively those companies raised $45.2 billion, or about 22% of all the venture dollars invested across the nation, according to PitchBook’s data.
There’s a “small number of companies that are being extremely well capitalized,” said Renata Quintini, a managing director at San Francisco-based venture firm Renegade Partners.
But that’s not the entire story of what’s going on in San Francisco or around the nation. There’s a “bifurcation” in the market, Quintini said, between those handful of large-scale AI developers and a large number of smaller startups that are building and innovating in the larger AI industry. And many of those companies are also based in San Francisco.
City-based startups closed 1,620 funding deals last year. That total was up nearly 17% from 2023. It also represented about 10.6% of all the funding rounds closed last year nationwide, the highest proportion of deals going to San Francisco companies since at least 2016.
The Bay Area has long been ground zero for the venture industry. Those investors have been looking at startups closer to home lately, particularly in the AI sector, the industry experts said. That’s because there’s an enormous number of people experienced with AI development in and around San Francisco, they said.
Many tech companies and startups, particularly those based in The City and the broader Bay Area, embraced remote work during the COVID-19 pandemic. But many venture investors have come to believe in the value of in-person work, especially in San Francisco, Flint said.
In-person teams are able to iterate more quickly, he said. That’s a competitive advantage in a fast-moving market, he said.
“The fastest moving startups are all in person and all in San Francisco,” Flint said.
“The in-person SF teams are the ones that get venture capitalists the most excited,” he said.
If they’re in The City, startup founders and their teams are more likely to have serendipitous encounters with potential customers or with other founders who can offer advice, Quintini said. It’s not that successful startups can’t be built elsewhere or that no other place has a similar ecosystem, but San Francisco stands out because so many startups and founders have succeeded here and investors are based here, she said.
There’s a “compounding aspect” of all those things being here in San Francisco, Quintini said.
“There is this dynamic of networks,” she said.
If you ask Flint, this is just the start for San Francisco, not a peak. The AI industry is still nascent, enterprise companies are still largely just experimenting with the technology, he said. Once they start really investing in it, the sector will really take off, which will attract more talent and capital and encourage further development.
“I think [San Francisco’s] attractive today to early-stage firms, and I think it will be even more attractive in the next couple years,” he said.
If you have a tip about tech, startups or the venture industry, contact Troy Wolverton at [email protected] or via text or Signal at 415.515.5594.
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