>If all the people are already on the West Coast what incentive is there to encourage relocation away from the West Coast as opposed to the continual brain drain from the rest of the country out to the West Coast?
Well, it's not true that "all the people are already on the West Coast", but even if it were, YC might awaken to the obvious truth that rapid population growth in west coast cities is not sustainable for much longer. Then, as a forward-looking, long-term thinking company, they might see fit to establish footprints in some of the less crowded, less expensive inland cities before someone else beats them to it.
Personally, I don't understand why people who have skills that are marketable in virtually any city in the first world choose to live with roommates in crappy century-old homes or tiny apartments in a handful of coastal cities. To each their own, I guess.