Despite your comment, I think we're kind of getting at the same point - if you have a great place to work and focus on building a team that works well together, you're going to have more success as opposed to hiring someone with X years of Ruby experience just because they know how to code. Focus on cultural fit, the technical stuff can be taught.
Signed, nameless derp
But on focusing on cultural fit, we certainly agree.
- another nameless derp
Word of mouth however is a pretty reliable way of finding solid developers provided you start with a good developer or two to begin with, and is a great way to build your team and culture - odds are if your team is recommending someone, they'll fit in with and extend the culture your company is going for. We saw an example of this when we opened our Vancouver office - after a few key hires we were able to attract a lot of talented developers who fit in nicely.