There's also the fact that California is regularly at the bottom of rankings of "business friendly" states. I'd rather locate my business in a state that wants me there.
The rankings are heavily biased against tax rates and employee's rights. They focus on the factors that are related to cutting costs, while ignoring the factors that are related to generating revenues or operating the business, such as access to capital, trained/educated/trainable employees, and customers.
California and New York, both frequently at the bottom of such lists, have all 3 in spades, which is why they're great for businesses that engage in active business activities (sales or services). The states at the "top" of the lists are great for businesses that depend heavily on the exploitation of labor and cost-cutting to generate revenue or growth.
I represent quite a few companies that left California for tax reasons, and ended up coming back. They lost more businesses than they saved in taxes by moving to "business friendly" states.
The bay area has 1) a large, talented workforce, 2) great universities, 3) lots of venture capital, as well as people who have "already done it" to give advice. Plus it's a nice place to live if you don't mind the traffic. Granted, opening an LLC costs X compared to a much cheaper Y in Nevada, but that's ultimately kind of small potatoes compared to all the things in California's favor.
That said, I'm more interested in bootstrapping something: what people like patio11, Rob Walling and company have achieved doesn't look like science fiction, and they're doing it in places that are not Silicon Valley.
Because it is good for workers, and therefore workers who value themselves (or more specifically, understand their value to businesses) will want to live someplace where their rights are more important than their companies.
For example: non-compete clauses are unenforceable in California. This makes it "unfriendly" to businesses, but much more appealing to highly skilled workers who don't want to be boxed out of their industry for two years just because they dislike their job and want to quit.
California and New York, both frequently at the bottom of such lists, have all 3 in spades, which is why they're great for businesses that engage in active business activities (sales or services). The states at the "top" of the lists are great for businesses that depend heavily on the exploitation of labor and cost-cutting to generate revenue or growth.
I represent quite a few companies that left California for tax reasons, and ended up coming back. They lost more businesses than they saved in taxes by moving to "business friendly" states.