The access to people you have here (for advices, fundraising, selling your company, etc.) can't be found anywhere else. That doesn't mean you can't do it anywhere else, but here it's just much easier.
I'm just surprised at what people go to to be really in downtown SF. That money could arguably be better spent making sure that the founders/employees eat more than cup noodles for the first 6 months, if it means driving 90 minutes to go to meetings or events.
They tend to be in lots of different places, most of which are not expensive places to live.
Where I am in my life, I actually find that much more appealing than the typical bay area startup, although I don't feel the need to be 'against' VC fueled startups either - they're capable of doing some things that bootstrapped companies can't.
In my own experience in Gifu, the fact that ~$3k a month not only supported me but paid roughly market wages was enormously helpful. Had I started in SF or NYC or Tokyo, the need to have $120k a year in profit to have the same standard of living would have probably kept me tied to a desk at AmaGooBookSoft forever. (I can afford to live here in Tokyo these days, but man, $3k in rent is an awful lot of bingo cards.)