Is San Francisco the new definition of Silicon Valley?

Silicon Valley is the term used to describe the region in the San Francisco Bay Area home to the world’s largest technology corporations. As Wikipedia says, ‘Silicon Valley refers to the southern part of the San Francisco Bay Area in Northern California’. But now many of the Valley’s hottest high-tech companies are choosing to base their offices in San Fransisco instead of San Jose, Mountain View and Palo Alto.

DropBox, Twitter, Zynga, Airbnb and Square have all chosen San Francisco over the South Bay to house their company offices, many in the warehouse district of SOMA where rent is slightly cheaper than other neighborhoods and the architecture is often large industrial warehouses over Victorian structures. 

San Francisco’s Mayor Ed Lee recently announced he would give tax breaks for startups like Twitter and Yelp to keep them in the city and the city’s Board of Supervisors is expected to vote on a proposal that would grant payroll-tax exemptions for companies that relocate to a run-down section of Market Street and the seedy Tenderloin neighborhood nearby.

Many of Silicon Valley’s high growth startups are still coming out of  the South Bay — Palo Alto based Stanford, Mountain View based accelarator 500 Startups or Sunnyvale’s Plug and Play give birth to many high-tech startups. A large part of the investment climate is still based towards the south bay, but once the startups are launched they are choosing to live and work in San Francisco.

Venture Capitalist Shervin Pishevar recently launched Menlo ventures based in Sand Hill Road. The firm invested in Techcrunch Disrupt winner Shaker, but chose to base its office in SOMA’s Startuphouse – a new co-working space launching this year.

“San Francisco has a more diverse range of people doing interesting stuff, SOMA particularly has an exciting energy at the moment. It’s like a stack effect, the  silicon chip manufactures of the 70’s are based deep in the South Bay, the system manufactures of the first dot.com are based further north around Mountain View and Palo Alto and the high-tech companies of today are up in the city, “says Shaker’s Bear Kittay.

However, once a company grows to a certain size it would have a hard time finding real estate big enough to house its staff. Google recently bought more buildings by its Mountain View based campus and Facebook has outgrown its offices in Palo Alto, moving instead to Sun Microsystems’ old offices based in Menlo Park.

Many of the companies that were booming in the first dot.com era still base their offices in the South Bay. The area is also populated by silicon chip manufactures like Intel which still base its HQ in Santa Clara, and Adobe Systems, founded in 1984 is in San Jose.

Elias Bizannes, co-founder of StartupHouse says the secret to Silicon Valley is the people —

“The relationships made are the secret sauce. Because the cost of innovation has come down so much, younger people are able to start companies so it becomes more about the relationships made and it’s easier to weave the social fabric where there are more like minded people so young entrepreneurs are choosing San Francisco for the lifestyle.

During the first .com boom rental prices got too expensive in Palo Alto so it pushed people up to the warehouse district of SOMA where rent was cheaper. Now the heartbeat of the city’s innovation is in SOMA.”

As many startups move their data storage into the cloud, physical space for servers is also becoming obsolete. And co-founders in the early days are choosing co-working spaces over offices to deal with business.

But there is still plenty of activity happening south with the incubator Black Box Mansion based in Atherton and the accelerator for black entrepreneurs NewMe based in Mountain View. But as entrepreneurs from all over the world flock to Silicon Valley they are choosing San Francisco over the South Bay as the line between work and play becomes more blurred at a time when we are always switched on and available.

Do you think San Francisco is the new Silicon Valley? What do you think are the benefits are of the South Bay over the city?