Why are all the startups in SF?

Firstly, SF != Bay Area (some people on this thread seem to conflate the two). SF is only part of the Bay Area.

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.

Being here for 2.5 years and knowing a pretty good amount of people in the startup world all I can say is money. There is money to be had here. It is the new gold rust. I came from North Carolina with nothing to lose and everything to gain. I am not looking for capitol. I want knowledge. There are so many amazing engineers here in a verity of fields. I love the inspiration and the conversations I have. You never know who you will meet or what VC's house you will end up having a few drinks at. I love the bay and I have no plan to move anytime soon.

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.

Startups (ones that will eventually grow) need funding. There's arguably more startup-accessible funding available in the bay area than the rest of the world combined.

There's a half dozen other factors, but most of them end up relating closely to funding sources.

Industries tend to cluster. Automakers in Detroit, investment banks in New York, country record labels in Nashville, movie studios in Hollywood. If you start a startup in SF, you get a built-in talent pool that you wouldn't necessarily get in Miami. Yes you pay higher salaries due to the cost of living, but you get a bigger selection of candidates (to whom you'd have to pay relocation fees to move them elsewhere). Plus, SF is just a cool place...walkable, great nightlife, culture. You don't get these things in a place like Phoenix.

Having lived in the Bay Area for more than half a decade, I can confidently say it has a lot to do with the fact that many people prefer to live in SF than in the suburbs (night life, etc) and building a company in SF is an attractive thing compare to asking people to commute (even if there are people doing it).

Startups need people. People need to have a life. SF offers precisely that!