> What I don't get is all the companies actually setting up shop in San Francisco. If I were a tech startup, I'd actually setup shop in a nice area relative to cost of living, then attempt to draw people out.

I live in Vancouver. I can wake up in the morning take the Canada Line -> YVR -> SFO -> BART -> your SF office by 10AM.

I bet there are a bunch of other cities like that. Portland would be a good bet, too.

But intellectual density matters. It matters especially at inflection points like launches, fund raising, etc.

Serendipity matters, too. You're going to end up meeting that next hire, customer, journalist, etc the next time you are in a coffee shop.