San Francisco Defends Global Tech Crown with Generative AI

If you think the shrinking office footprint of Bay Area tech giants means San Francisco has lost its status as the leading global tech hub, think again.

The dawning of the age of generative artificial intelligence has sparked another California gold rush. VC players who closed their spigots in H2 2022 now are racing to fund AI startups.

Since the beginning of the year, an estimated $20B in venture capital has poured into AI-focused startups globally, according to Crunchbase data, with the lion’s share—more than $14B—going to companies in the Bay Area.

Momentum rapidly is growing for what one investor predicts will be a “massive wave”—okay, let’s just call it a tsunami—of VC money heading for AI-focused startups in the Bay Area.

In February, as the buzz around ChatGPT heralded the arrival of generative AI large language models (LLMs), San Francisco-based venture capital firm SignalFire announced it had closed on more than $900M in new funding to boost investments across its portfolio.

SignalFire, an early player in machine learning, said it was aiming to double its AUM to a new total of $1.8B by “seeking out opportunities for AI to revolutionize” target sectors including health care, cybersecurity, fintech, enterprise software, developer tools and enterprise infrastructure.

The firm said this week it will invest $50M to identify and incubate AI-powered enterprise software startups. SignalFire plans to invest in startups that go through its AI Lab, which will match entrepreneurs and software engineers with corporations that want to apply generative AI to their operations.

One of the biggest challenges to the commercialization of generative AI is figuring out how to integrate LLMs into corporate business platforms while preserving private corporate data, SignalFire CEO Chris Farmer told Bay Area Inno.

Farmer, who expects SignalFire to incubate up to 15 AI startups through the AI Lab this year, said software companies are gaining a competitive edge by developing LLMs in sectors including law and medicine, which require platforms that work with public and private data. The models are configured to allow clients to generate their own incremental private data sets.

Enterprise software leader Salesforce—the largest tech employer in San Francisco, with its name on two HQ towers—also is stressing trust and data protection on its recently unveiled AI Cloud.

Salesforce’s plans for AI Cloud mirror Amazon’s strategy for its recently launched Bedrock, which offers a family of LLMs trained in-house by Amazon Web Services (AWS) and also serves as a platform for pre-trained models from startups who are looking for a partner that will enable them to scale up.

AI Cloud will be offering LLMs trained by a range of partners, including AWS, Anthropic, Cohere and GPT-4 pioneer OpenAI, as well as “first-party” models trained by Salesforce’s research division to drive capabilities including code generation and business process automation.

Salesforce is offering “enterprise ready” generative AI with a guarantee for customers who bring their own custom-trained models to AI Cloud that they can protect their sensitive data—which will still be hosted on their own infrastructure.

Salesforce has branded its data protection program the Einstein Trust Layer, an AI “moderation and redaction” tool designed to prevent a text-generating LLM from retaining sensitive client data. The Einstein Trust Layer is similar to AI chip-maker Nvidia’s NeMo Guardrails, products that are aimed at companies with strict compliance and governance requirements.

SignalFire’s CEO describes the rapidly expanding generative AI sector as “incredibly fast-moving waters” that are “head-spinning”—which also is the textbook definition of a tsunami.

Farmer predicts that San Francisco will maintain its global crown as the world’s leading tech hub in this rapidly advancing generative AI tsunami.

“The nexus of the talent is local in San Francisco. I do think this is an opportunity to be at the ground floor of another massive wave in the Bay Area of tech opportunity. [It will bring] corporations from other geographic areas back,” Farmer told Bay Area Inno.

“There’s [been] a lot of beating us up. The crypto community moved out and all this kind of stuff, and guess what? When it comes back to real tech again—hard tech and not a bunch of hype—it’s going to come back to where that core talent is. And that core talent is here,” he said.