I'm very convinced of Paul Graham's take on this, in that there are positive network effects to locating near people and organizations like yours.

That being said, I agree with the author...but only because I'm starting to think that the toxicity level of SV culture is starting to outweigh its positive network benefits of talent. SV startups are completely overrun by a TechCrunch mentality of hype-machine backed, poorly conceived products...and if you aren't funded you are dead. Some startups may thrive in that culture, but far from all will.

I would argue that you should locate where you get the benefit of colocation of focused talent, rather than colocation of focused intent. In other words, if you are a cruise vacation startup, you need to be in Miami, not Cupertino. And if you are a media startup, you need to be in Los Angeles or New York, not Mountain View.