If you want to sell software, it's good to be situated physically next to the biggest software companies in the world. I work in the Valley (but live on the East Coast), and having your company immersed in that culture can have benefits. There is a certain perception that persists, a certain level of legitimacy you are granted just for living alongside the Big Boys. Along with the accompanying downsides, of course. The answer to why VCs stay in the Valley is because it's been working for them.
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