A lot of investors won't invest in companies that don't have large offices in the Bay. Investors also generally advise against having remote offices when you have less than 100 people. As a result, there's not really any reason that startups need offices there other than that it can be difficult to get investment if you're based elsewhere.

EDIT: I shouldn't say "the Bay", but rather, "the Bay/LA/NYC/Seattle". I more mean "top tier startups cities" rather than strictly just the Bay, per se.