IPOs of Uber, Airbnb and Slack could pour cash into San Francisco

Freestyle has been looking for deals elsewhere in part because of how expensive San Francisco has become from an investing perspective. Felser said he’s finding “pockets of technological dominance” around the world, whether it’s Finland for mobile gaming or Estonia for cryptocurrencies.

“Valuations are as high as they ever have been,” he said. “That is kind of a uniquely Bay Area thing. You invest in the same company with the same kind of metrics and they’re going to be 30 percent cheaper outside the Bay Area.”

Felser isn’t alone. According to a survey of Silicon Valley venture capitalists released on Thursday, confidence among start-up investors is at its lowest in almost a decade, with some investors citing the sky-high costs of living and doing business in the San Francisco region. Smaller start-ups struggle to compete.

“There’s just an out-of-whack supply and demand, because these companies that are going public are growing so fast they’re scooping up every available employee in the market,” Felser said. Those going public will have this “influx of cash and so they can actually hire more and faster, and maybe there’s more pressure to grow faster.”

Investors are finding more hidden gems outside the Bay Area, because the risk-taking ethos that’s often associated with San Francisco is spreading, said Eric Byunn, partner at Centana Growth Partners, an investment firm with offices in Silicon Valley and New York.

But Byunn isn’t expecting to see a mass exodus of capital. Silicon Valley goes through boom-and-bust cycles, but always reinvests in itself. There’s no reason why that won’t continue.

“There is absolutely a certain density and concentration of interest and talent and resources to build a company here,” Byunn said. “You go into a trendy restaurant and three-quarters of the conversations in the restaurant are about technology and start-ups.”

—CNBC’s Ari Levy contributed to this report.

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