📶 SF is back (according to AI data)

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Good morning 👋

And welcome to the start of the work week.

We’re breaking down some data to officially make a claim: SF is back. At least according to the data.

The AI boom has reversed the trend of distributed capital, and now >40% of equity funding is backing Silicon Valley-based companies again.

We break it down, give our take on why it matters, and what we think happens next below.

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TL;DR:

• 👀 Top

• 🔗 Links

• 🐥 Tweet

• 📰 Headlines

• ™️ Startups

• 🗳 Poll

TOP STORY
SF is back (source: the data) 🌉

Silicon Valley is reaping the benefits of the AI boom, capturing 41% of all U.S. venture funding in 2024.

In Q3 alone, its startups raised $10.5B—more than 2.5x what New York brought in $3.9B. LA and Boston trail behind with $2.9B and $2.8B, respectively. Over two-thirds of Silicon Valley’s deals are at the early stage, pointing to an increasing number of new companies entering the game.

Why it matters: For anybody closely watching and investing in the AI wars, none of this should be a shock. But as this trend of AI consolidation in major tech hubs plays out, here are a few second-order effects we’re watching:

• The concentration of capital, junior talent, and leadership in Silicon Valley and other tech hubs.

• The reprioritization of building companies within these talent hubs.

• The commercial and residential real estate markets in SF and other cities where many SF transplants relocated during 2020 (looking at you, Austin, Miami, and Nashville).

• LPs shifting their geographic focus back to GPs based in these major markets instead of diversifying their interests to other regions.

What happens next:

Silicon Valley’s AI boom is reinforcing something that was forgotten over the past few years: if you want to build a venture-backed startups, the odds are better stacked in your favor if you do it in SF.

With over two-thirds of its deals in seed and Series A stages, the region isn’t just riding on the success of established unicorns—it’s fueling a whole new generation of startups. As AI continues to disrupt industries, these early-stage companies will likely emerge as leaders in fields like autonomous systems, generative AI, and enterprise tools.

Over the next few years, expect the Bay Area to attract more AI-focused talent, especially as the market for AI developers heats up.

With so much capital flowing to these companies, we could see significant advancements in AI tech and its application to areas like healthcare, finance, and education. Investors will stay hungry for early-stage AI bets, and the returns could reshape how other regions think about competing with Silicon Valley.

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LINKS

🗣️ My Best Advice For Entrepreneurs—-Learn to Speak: It’s never too early or too late to start

2️⃣ Is It Day Two At Amazon?: Jeff Bezos once told employees that Day Two looks like “Stasis” and that’s why Day Oneness is seen as the key to fending off complacency and displacement

🥸 Big Fake Valuations: CBInsights says 85% of the 1/3 of all unicorns with a valuation of $1B are fake

⁇ 40 Favorite Interview Questions: First Round spent months asking some of the most thoughtful company builders “What’s your favorite interview questions and why?”

📆 How Daily Accountability Turned into a 7-Figure Fitness Empire: Adam Gilbert built MyBodyTutor into a powerhouse without a single round of funding

⏭️ After AI, What’s Next for VC?: Data-Driven VC shares Henrik Landgren’s (Spotify, EQT, now Gilion) thinking about what’s next of the VC agenda after AI

📶 September Recap: Behind the scenes of our business

TWEET

HEADLINES
What else we’re reading 📖

• Initialized Capital restructures, and lets multiple partners go (TechCrunch)

• New York’s top VCs under 30 (TechCrunch)

• OpenAI valuation surpasses every VC-backed IPO (Pitchbook)

• Ali Rowghani, who started Y Combinator’s growth arm, is raising a $250M seed fund (Pitchbook)

• Investors are scrambling to get into ElevenLabs, which may soon be valued at $3 billion (TechCrunch)

• Google Starts Selling Ads in AI-Powered Search Results (The Information)

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POLL

Thanks for reading this far and giving us a little bit of your attention this week.

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- Clay

RESULTS

Here are the results from our poll question in Thursday’s piece:

Would you consider yourself a specialist investor or a generalist investor?

🟩🟩🟩🟩🟩🟩 Specialist (51)

🟨🟨🟨⬜️⬜️⬜️ Generalist (33)

84 Votes