Why are all the startups in SF?
There are so many startups in SF. What is the advantage for a startup being in SF? The rent is crazy high, salaries need to be higher due to rent, lot of competition for a skilled developer, etc.
Despite what mchannon and deadfall say, the concentration of startups in SF, versus other areas in the Bay Area, actually does not have to do with money. SF is actually relatively far from venture capital than other places in Silicon Valley. Most venture capital firms are based out of the peninsula (1 hour south of SF), in suburbian cities like Mountain View (YC and 500 Startups), Palo Alto, and Menlo Park (pretty much every VC firm, like KPCB, Sequoia, A16z, Greylock).
Most people live in SF because 1) Young engineers/designers/others prefer living there, and 2) the density of startups/entrepreneurship is greater. The chances of you serendipitously running into someone "useful" is much higher - the sheer quantity of networking events, technology events, social events, etc. is mind-boggling. Compared to SF, there is literally nothing going on in Mountain View/Palo Alto/Menlo Park.
On a side note, the weather is not bad. The beach and mountain hiking in the redwoods is a short drive away. A little further and you have some of the best snowboarding and ski in the winter.
There's a half dozen other factors, but most of them end up relating closely to funding sources.