It's one reason to go to the valley, but not the only one. When I moved to the valley last year, everyone asked me why? I said "People". Those people could be new friends at other startups, future talent for my company, future informal advisors, potential investors, or an awesome bartender at the Olde Pro in Palo Alto. The Valley exposed me to people that I couldn't have met anywhere else.
If you love technology and startups, you should probably give it a shot out there. Just because you move doesn't mean you'll have magic VC genies grant you three rounds of funding. You will definitely meet some awesome people along the way.
Agree about the other benefits in addition to access to VCs, but it's still arguable if they're worth the higher cost of living. If you're a bootstrapped startup, you'll hit ramen profitability much sooner elsewhere. When you have an infinite runway, you'll have infinite time to find people as well :).
Living in the Valley is not especially expensive for founders. Buying a house in the Valley is notoriously expensive, because there is so much speculation built into prices (even now). But renting a two-bedroom apartment in Mountain View is no more expensive for equivalent quality of life than in Boston.
We gave groups the same amount of money in Boston cycles as in Bay Area cycles, and we never noticed any difference in how long it lasted.
$695/mo for a 2-bedroom apartment. Not a great neighborhood but could be worse. You'd be lucky to share a bedroom for $350 a month in Boston.
Many other expenses don't change much, though, like food, and some go up, like heating and electricity. And in Utica, the chance of overhearing someone talking about PhD-level computer science while you're out to eat is virtually zero.
Like staunch mentions, there are cheaper places to live in than either SiV or Boston. Living in Austin-TX would cost half as much for instance. Living in developing countries would cost even less (at least if one doesn't insist on 100% equivalent quality of life).
Disclaimer: we're based in the valley and are happy for it, but that's because we're profitable anyway.
I did this. I built the prototype for my first startup in Goa, India, using GPRS internet (unlimited access for a fixed price, because it was a beta).
I even recommend it, assuming you can connect with real alpha customers before moving over there, or if you have a bizdev guy stateside. I had to download overnight but it was workable. I spent my days floating in the pool reading books like 'Design Patterns' and Java/Eclipse books to help me understand Eclipse well enough to build my app using it. I programmed by night. I got the prototype done.
The ticket over from Atlanta was $1200 or so. My rent was $400 a month in a 4 star resort on the beach (off season), and that was my only appreciable expense because food was basically free. There was even another entrepreneur with a PhD there doing the same thing, and he had brought his entire book library with him in an ocean container!
BTW - I came home with about six feet (when stacked) of books, because they were so cheap. A good technical book in paperback is about $5 at the TATA bookstore at IIT in Bangalore. I couldn't help myself, I bought a complete library and two suitcases to carry it home in :)
Disclaimer: I heave a 'weak stomach' and I got dysentery twice, methanol poisoning once and other weird stuff in between, but mostly they are avoidable if you get your shots, go vegetarian (they make it EASY), and be super strict about bottled water.
I met several hackers who moved to India to be able to work on whatever they wanted without doing much in the way of consulting. One guy was there productizing Israeli mesh networks to supply wifi and VOIP to Tibetan refugees in Dharamsala. Another guy was building FOSS tools for college professors. There is an entire subculture of people that do this.
Just watch out: its easy to get distracted. And check your calendar and remember the monsoon is no joke :)
Living in the valley was actually much cheaper for me than Miami. That's from housing to my car (the lease was cheaper out there, so I waited till I was situated to get one) to food (jack in the box value menu ftw). I'd suggest living with others, as the 1 bedrooms do seem to be higher priced to rent. Gas is never fun, but that's most of California. Take the 22 or 522 bus. It runs 24/7 down el camino and costs 60 bucks a month for an unlimited pass.
I moved from Pittsburgh, PA to the South Bay last summer. While the cost of living is somewhat higher in the Valley, in my experience it is not as much higher as it is usually made out to be (except for buying a house, as pg mentioned).
* Housing: I'm renting a 4 bedroom / 3 bathroom house in a nice area of Sunnyvale with 2 friends. My share of the rent is about the same as the rent I was paying for a large 1 bedroom apartment in Pittsburgh.
* Food: Restaurant prices seem to be about the same or a little bit higher. Groceries are definitely more expensive. The first time I went to the grocery store, all of the prices seemed 10-20% too high. However, with some careful shopping, you can stock up when items are on sale and not pay much more than I was paying in Pittsburgh. Buying fruits and veggies at a farmer's market also helps keep the cost down and the nutritional value up.
* Car: I drive more often and further now. The Valley is not designed for pedestrians. With the rapid fall of gas prices, this hasn't been a big deal for me, but plan on spending more on gas and maintenance if you don't currently drive much.
* Taxes: California's sales tax is very high. It's going up by another 1% on April 1, to 9.25% (or more, depending on where you live). California also has one of the highest personal income taxes in the country. I'm not happy with this state of affairs, but I think it is worth it to be in the Valley. In the long run, this could really hurt California, though.
In short, it is more expensive for me to live in the Valley than in Pittsburgh, but it's not as bad as I was led to believe. Perhaps this is because I don't have much interest in buying house at this stage in my life. Most of the people who told me the cost of living was "insane" in the Valley were family men who already own a house and were factoring the cost of replacing that house into their calculations. For the rest of us, if you can get by in some other major U.S. city, you can probably get by in the Valley.
To me the valley seems like a good place to grow if you're already profitable and can't find enough talent in whatever location you started. For a business with a few guys doing product development in an apartment and counting every penny, I just don't see the justification for the cost of living.
I live over in Australia -- My cofounder and I are in Bay Area (visiting) and the access to having access to the people/minds here is astounding... And as you allude to - it's not just hackers, it's a whole ecosystem of people that can contribute to your idea.
Definitely about the people. Unless you are the founder of a company, you are never working for the _current_ company, but instead are working for the next company (in which you will be a founder, or an early stage employee that gets a good chunk of equity) - you need to demonstrate that you are someone they want to hire.
With the possible exception of craigslist, where they manage to accomplish heroic feats with very little in the way of staff, any company that is eyeballing $1B+ market-cap will grow to hundreds, and possibly thousands of employees.
Where else on earth can you find such a concentration of DBAs, Sysadmins, Designers, Tech-Friendly-Lawyers, Developers, Product Manager who have all three of the following characteristics:
o Very, Very good at their job.
o Real world experience in several major companies.
o And, most importantly, willing to go to work for a "lets throw caution to the wind" startup.
Change is the only constant in the valley. People here, for whatever reason, are just comfortable changing jobs, sharing information, and building new things.
The weather is astoundingly good. Never too hot or too cold - 350 / 365 days in the year. And the other 15 usually mean having to actually turn on your heater or open a window on a warm summer night.
The peninsula, for the most part, does suck in terms of lifestyle. There are exceptions (Murphy Street in Sunnyvale, Good portions of San Francisco, downtown San Jose on a Saturday night) - but, in general, it's mile upon mile of suburbia and strip malls. This is not Manhattan or downtown Vancouver. (On the flip side, with few distractions there is more time to get work done)
The major downside is that unless you are filthy rich or already a home owner, the only sane strategy (unless you don't mind commuting for 90-120 minutes each morning) is to rent.
With all that said, if what you are looking to do is grow a company organically, and have your eyes set on something more sane like a $10mm-$100mm market cap over 5-10 years, there are probably a lot of ways to succeed without being in the middle of it all.
If you love technology and startups, you should probably give it a shot out there. Just because you move doesn't mean you'll have magic VC genies grant you three rounds of funding. You will definitely meet some awesome people along the way.