What's so special about the valley, besides being around other startup folks, that entrepenuers feel they must be located there? Now before you go off quoting Paul Graham or Marc Andreessen please consider these folks have a vested (pun?) interest in startups being (or wanting to be) located in SV, and thus their opinions are partially biased (or drunk with kool-aid).
Personally I don't think it does. As a matter of fact, I think being in Silicon Valley can even be a disadvantage for these reasons:
- It's prohibitively expensive to live, especially if you are bootstrapping.
- Startups in Silicon Valley seem to to succumb to groupthink as far as Internet trends go, resulting in a lot of "me too" operations and business practices (how many attached "beta" to their logo after Google made it cool in 2004?).
As a bonus answer, what would you consider an ideal alternative to Silicon Valley? Seattle, Austin, Toronto, New York, London, even Boise (google "Boise startup") seem like good alternatives.