SF is Back
This past week, the Panache Ventures team returned to San Francisco for our annual Bay Area retreat. It was my second trip to SF in as many months and my fifth visit this year, but this trip was different. After this most recent visit, one thing is unequivocally clear to me:
SF is finally, actually, genuinely back.
Really…?
I lived in the Bay Area for 18 years, 12 of those in San Francisco’s South of Market (SoMa) neighborhood. When I first moved to SoMa, there were virtually no tech companies there. People lived in SoMa primarily because of its proximity to the Caltrain and the 101 (the two main ways of getting south to Silicon Valley). But after Ed Lee became mayor in 2011 and changed some of the city’s notoriously anti-business policies, SoMa quickly transformed into the heart of San Francisco’s tech scene. As new condos and office buildings filled the skyline, startups flocked to the neighborhood.
We moved DataHero’s HQ from Palo Alto to SoMa in 2013
Investors soon followed and by 2015, the South Park area of SoMa was surrounded by VC offices. Big tech came too. Google, Facebook, Apple and many others established sizeable outposts in SoMa to attract SF-based tech workers who didn’t want to commute 2+ hours each way.
All that changed with the arrival of Covid. Almost overnight, San Francisco’s most bustling tech neighborhood became deserted. As tech companies big and small shuttered their offices, many local restaurants, bars and shops were forced to close. The shiny condo buildings once popular with tech workers saw their occupancies plummet as many left the city.
2nd and Mission, in the heart of SoMa (mid-2020)
When you live in a neighborhood for 12 years, it means something to you. The places you visit, the small businesses you frequent and the many people you see week-in-and-week-out become a part of your life. I’ve been back to San Francisco nearly two dozen times since moving to Vancouver 3 years ago, and on every visit I make a point of of visiting and supporting my favorite restaurants and local shops.
It’s been hard to watch many of them struggle through Covid, only to emerge directly into another battle-for-survival.
But on my most recent visit, something was different. For the first time since 2020, SoMa felt like SoMa.
The Return of SoMa
When we arrived on Sunday, the streets of SoMa were filled with a particularly San Francisco brand of energy. Over the course of the week, our hotel pulsed with the vibrancy of tourists, tech conference attendees and baseball fans gearing up for the annual Giants-Dodgers rivalry (though it wasn’t much of a rivalry this year).
It was clear that the restaurants and bars were also experiencing a revival. One of my long-time favorite restaurants was packed solid on Wednesday night — the first time I’ve seen it full (on any night) in years. Catching up with the owner, she shared that it finally felt to her like they were turning a corner, after numerous near-death experiences.
Several bar locations that had previously shuttered had re-opened. Nearly all were busy for happy hour. There were people walking up and down the streets after work. Not nearly as many as pre-Covid, but a lot more than before. You couldn’t help but overhear people commenting on how good it felt to be busy again.
Sitting outside in the cold because the happy hour bar we went to was full
On Saturday morning, I visited the San Francisco farmers market — one of the largest farmers markets in North America. When I lived in SoMa, shopping at the farmers market was a weekly ritual for me. I would always go early (7:30am, at opening) in order to avoid the crowds and get the best produce. For the past three years, no matter what time of day I went, the foot traffic was sparse.
This past Saturday, it was packed.
I would guess that the number of vendors was about 80% of pre-pandemic and the number of shoppers about the same, but it was a marked improvement from my last visit.
There was something else I saw that morning for the first time in years: dozens and dozens of runners jogging up and down the Embarcadero, weaving in and out around morning shoppers. When I was a local, I used to complain about having to dodge tourists while running on the Embarcadero, but seeing this sure felt great.
Forever A Gold Rush Town
Since the day that gold was discovered in the Sierra Nevada foothills in 1848, San Francisco has been a gold rush town. Nearly two centuries after the actual gold rush ended, the Bay Area’s population continues to ebb and flow with the economy. In the late-90s, people rushed to join the dot-com boom, then fled when the bubble burst. Same thing in 2008. And again in 2020. But a funny thing happens each time: after the opportunists leave, the builders arrive.
When I moved to the Bay Area in 2002, most people were leaving. The only people coming here were hungry to learn and eager to build. It was like going the wrong way on a busy escalator. The same thing happened in 2009-10.
And it’s happening again in 2023.
Many of the people who loudly fled for buzzy destinations like Miami and Austin have quietly returned. But more importantly, new, young builders are coming. I personally know dozens of founders who have relocated to the Bay Area for the first time in their lives this year — 5 of them in the past month.
As a result, the buzz of startup activity around the city has started to return. Almost every night, there are meetups, hackathons and networking events taking place across San Francisco. When Panache Ventures hosted our latest U.S. investor event — a standing room only affair for VCs, angel investors and others in the Silicon Valley ecosystem — it was one of several stops for many of the people who attended. And that was on a Tuesday night!
Rana Sarkar, Consul General of Canada
I even saw some very early, very small — but also very meaningful — indications of a thawing of commercial real estate. SF has a particular commercial real estate challenge that will take years, if not decades to dig itself out of, but over the course of the week, I met with multiple VCs and founders who were in the process of moving into new or larger offices. Some were admittedly taking advantage of the current dip in commercial real estate prices, but many were moving in order to accommodate larger teams. That’s a positive sign.
Back, But Not Back
As excited as I am about what I witnessed last week in San Francisco, I want to be clear that SF is still a long way from returning to its pre-pandemic form. It may never get back there.
Without going down the (very deep) rabbit hole of San Francisco city politics, there are a lot of structural challenges that need to be fixed and the timeline for those fixes will be measured in years. While some conferences (and conference attendees) are beginning to return to San Francisco, the city continues to lose flagship events. Prominent local businesses continue to close, even while others open anew.
SF is back. But it’s not “back”.
At least not yet.
Can we still create this future?
What Does This Mean for You?
For founders, investors, and others who care about tech, my message is simple: it’s time to pay attention to San Francisco again.
In contrast to the doom-and-gloom of the mainstream media, startup and investor activity is picking up dramatically in both San Francisco and Silicon Valley. While we still haven’t hit the bottom in terms of tech layoffs or startups reaching the end of their runway — and San Francisco itself has an incredibly difficult journey ahead of it — the phoenix is beginning to rise from the ashes.
The city of San Francisco is different from before. SoMa is no longer ground zero for everything in tech. Many startups and VCs have moved to other neighborhoods, like the Mission, Potrero, the Presidio and Hayes Valley (though for the love of god, please stop trying to rename it “Cerebral Valley”).
If you’re a Canadian VC, it’s once again time to get out of Canada. If you’re a Canadian founder, you should probably do the same. Founders and investors alike need to benchmark themselves against the best in the world, and the San Francisco Bay Area is reclaiming its crown.
Despite all of its challenges, the City by the Bay remains at the center of global innovation. It’s also the only place in the world you can get picked up by an autonomous vehicle that plays this:
I, for one, welcome our new overlords…