Yeah, I guess it might be possible if you're a small company and everyone is willing to live close by but if you need to attract talent, that commute would be an obstacle.
A long time ago, but I used to work for a European subsidiary of a company headquartered in Santa Cruz back in '99, and when we went over to visit we could not go a day without hearing almost the whole team bitching about Hwy 17...
Apart from people like the CTO who had a fantastic place nestled deep in a small valley in between the nearby redwoods, or the CEO who had a huge house in Santa Cruz and had his sailing boat in the harbour.
A fairly large number of potential hires already live in Santa Cruz. The primary commute direction is from SC to the Valley rather than the reverse, because there are many more software engineers living in SC than tech jobs there, so they have to drive over the hill to San Jose or Mountain View or Cupertino to work. Plenty would be happy to skip that drive and take a job in Santa Cruz, if more existed.
Apart from people like the CTO who had a fantastic place nestled deep in a small valley in between the nearby redwoods, or the CEO who had a huge house in Santa Cruz and had his sailing boat in the harbour.