Has South Park Finally Become the New Sand Hill Road?

Come June, Redpoint Ventures will be opening a new office in the quiet little enclave of South Park in San Francisco. The firm is the latest in a long line of venture firms to make the move here, establishing an official presence in the city along with their original locations in Silicon Valley.

In the last two years, a big chunk of investors have ended up within a one block radius of each other in South Park, with nine firms now staking out territory in the tiny historic neighborhood.

Nikhil Basu Trivedi, an investor at Shasta Ventures, strolled past the quaint homes that line South Park, pointing out buildings that venture capital firms have recently taken over. “That little house used to be a bicycle shop,” he said. “Now, it’s Norwest [Venture Partners’] offices.”

A little farther down he gestured to a hollowed-out building under construction, where Redpoint will soon be. He ticked off others on his fingers: “True Ventures was first to South Park, years ago. We moved below them September 2013. Kleiner [Perkins] came six or nine months later. A later-stage firm called Founders Circle is in our building too.”

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The firms he named aren’t the only ones — Google Ventures set up shop in South Park in January 2014 and Accel Partners, SoftTech VC have offices less than a block away. Index Ventures set up its SF location even earlier, in 2011, two blocks south of the park.

With the addition of Redpoint, there is no question now that South Park has morphed fully into the new Sand Hill Road.

“It’s Sand Hill, but with street art and better burritos,” added Redpoint’s Ryan Sarver. “There are great attributes of Sand Hill, but it’s insular and isolated, there [are] no people running into each other — you go to the office, you have a meeting and you’re done.”

For the uninitiated, Sand Hill Road is the avenue in Menlo Park, Calif., where for decades nearly all the major venture investment firms have resided. Since Kleiner Perkins Caufield & Byers first arrived in the 1970s, it’s where most major tech companies have been pitched and funded.

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For those trying to make it in tech, Sand Hill Road is more than just a place — it has become the symbol of promise and possibility, where dreams go to take flight or die in treks through the suburban office complexes.

It still continues to be the investment mecca — Kleiner, Andreessen Horowitz, DFJ and dozens of others are still ensconced there. But, in recent years, most firms have also set up outposts in San Francisco, as money follows the talent and startup energy shifts north. That has been a clear trend recently, as consumer company founders and the engineers who work for them favor the hipper enclaves of the city over the stodgy suburbs of the South Bay. Index Ventures has forsaken the Peninsula entirely, choosing only to have an SF office near South Park for its U.S. team.

While VC firms have located elsewhere in the city — Benchmark has staked out a large office in the mid-Market Street area, along with Greylock Partners — they have chosen South Park overwhelmingly.

South Park crêperie The Butler and The Chef owner Joel Martin has watched the neighborhood change from his perch as a local business owner. “South Park is like being inside a theater,” he said. “[The VCs] just want to have a spot with the cool kids.”

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If that’s the case, none of the investors I interviewed would admit to it, all saying they didn’t move near one another on purpose. “It’s been serendipitous,” said Google Ventures’ M.G. Siegler.

What they do admit is a need for speed. With fierce competition over the best startup deals, venture capitalists need to be close to the people they’re wooing. “We don’t believe so much in the big, formal meetings as we do the frequent, more casual updates and encounters,” said Jon Callaghan, a partner at True Ventures. “That made South Park a great choice for us.”

Apparently, founders and investors can bump into each other spontaneously on the sidewalk, in line at the wine bar/grocery store Small Foods, or at Caffe Centro. “Sometimes I have people over and we go sit on one of those picnic tables in South Park,” said Norwest’s managing partner Jeff Crowe. “Or I’ll walk by and see other VCs out there, and I’ll stop and chat with them.”

Sean Flynn, managing partner at Shasta Ventures, remembers a similar spontaneous encounter helping him close the deal on recruiting a senior-level employee to a portfolio company.

On Sand Hill Road, the only place for accidental encounters was the Rosewood — a hotel frequented by the rich and powerful. “I would be at the Rosewood maybe once every quarter,” Flynn said. “But I walk out onto the streets of San Francisco every day.”

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It isn’t the first time in South Park’s history that its grassy knoll and convenient location attracted the wealthy and powerful. The neighborhood, one of San Francisco’s first-ever parks, was built in the 1800s as a private area for the city’s high-fliers. According to documents from the San Francisco Parks and Recreation Department, “established in 1852, South Park was originally conceived as a London-style city garden, ringed with upscale residences.”

The area was home to ship captains and senators, foreign consuls and justices of the state Supreme Court, “widows” and even a man whose profession simply read “Grain King.”

But the movers and shakers of the city didn’t stay in South Park forever. The 1906 earthquake decimated the original mansions, and the city eventually rebuilt the neighborhood as a mixed residential-industrial space where working class Japanese and Filipino merchants lived. It wouldn’t attract the attention of upperclass residents again until the late 1990s, when the early dot-com entrepreneurs discovered South Park’s open lofts, convenient structures for small five-person startups.

These days, real estate prices here have skyrocketed at an even higher rate than the rest of San Francisco. Connie Chung, a Vanguard realtor focused on the neighborhood, said that the average 1,200-square-foot loft in South Park rents at $4,500 a month, compared to $2,000 a month in 2011. “Some of the prices are ridiculous and sky-high and don’t make any sense,” Chung said.

While VCs can foot that bill, not everyone else can do the same. Although South Park is traditionally a startup haven — it’s where both Instagram and Twitter were first headquartered — it may not stay that way for long.

“The VCs are cannibalizing their own startups,” said John Milinovich, the CEO of South Park-based URX.

This post has been updated to add Index Ventures to the list of firms near South Park.

This article originally appeared on Recode.net.

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