While working at a Venture Capital firm last summer as a project manager, I learned that there are many interpretations to this answer.
For one, each of the managing partners of my firm answers this question differently.
Many VCs, including the managing partner I worked under, believe that the location of Stanford in Silicon Valley is an integral component of why so many tech companies are based in the bay area (he graduated from Stanford with a degree in engineering).
After the students graduate with an idea (or with a product created while on campus), they stay close to home and start building their company up due to this convenience.
This is true for Google, Yahoo, and countless other tech startups.
Another belief is that entrepreneurs gravitate towards the bay area because out of all of the VC firms in the country, a disproportionate amount are located in the Bay Area.
While many of the larger firms invest nationally (and have travel expenses included in their budget to visit companies in Chicago per se), many of the smaller firms require their potential investment to be located within X miles of the firm.
Countless times while I was analyzing dealflow (the potential deals coming into the firm), a perfectly viable company from Denver, Colorado would get passed up for a “better fit” startup located in Palo Alto or San Francisco.
Thus, it is to the entrepreneurs advantage to be located in the area.
Finally, it was reported in Forbes that William Shockley, the co-inventor of the transistor, went back “home” for the good weather and to start his company.
Being a California native myself who goes to school on the east coast, I can attest to how important weather can be when determining where to work.
The Bay Area climate is definitely an added benefit for entrepreneurs looking to relocate.
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