It was during his time in Peru that he heard of gold being discovered in California, and booked passage on the Pacific Mail steamship Oregon, bound for San Francisco.

Using horse-drawn cars, he ran a line from Third Street and Townsend to Union and Powell, as well as one running from Montgomery and Washington to Howard and Mission Dolores.

[3] He later decided to place the railhead farther south at Point Tiburon, building the railroad ferries that connected San Francisco to the Northern Counties.

[7] Donahue's Union Iron Works constructed many of the graceful double-ended railroad ferries that plied the waters of the San Francisco Bay well into the 20th century.

(The Eureka, built in his Tiburon yard five years after his death, can still be seen today at San Francisco Maritime National Historical Park on the Hyde Street Pier).