I'm really not involved in the startup scene much at all, but my impression is that the amount of startup funding available elsewhere is just nowhere close to what's available in the Bay Area.
That might have two implications: First, more startups are able to get funding in the first place, and, second, of the ones that get funded, the average amount of money they raise is much higher.
If so, then it's not necessarily that more companies insist on starting out there, so much as that it's a sort of survivor bias: The Bay Area's business climate is just one that is able to grow more startups to a big enough size that you hear about them.
I would love to see a breakdown that shows the amount of money companies spend to be in the Bay Area versus the amount of money they raise, compared to the money companies would save not being in SV versus the amount they can raise there. It might be worth the added cost, it must be worth the added costs, but it's strange to just say "they can raise more money" because they also spend more. There may be fewer VCs in Pittsburgh, but cost of living is also lower, there are plenty of challenge-hungry programmers and MBAs there, and CMU is (subjectively) a better CS school than UC-Berkley.
That might have two implications: First, more startups are able to get funding in the first place, and, second, of the ones that get funded, the average amount of money they raise is much higher.
If so, then it's not necessarily that more companies insist on starting out there, so much as that it's a sort of survivor bias: The Bay Area's business climate is just one that is able to grow more startups to a big enough size that you hear about them.