The answer is that there's a lot of passive capital in the world in pension funds for teachers and police officers. Much of that passive capital is invested in bonds and equities, but some of it gets invested into private equity, of which VC is a subset.<p>Now, what happens is that a large proportion of the passive capital ends up in Northern California. It has to be invested somewhere. In VC, it has to chase ideas. The problem is: most ideas are lame, and most people don't have the ability to tell which ones are lame (and lame ideas can succeed in the short term: see Pets.com and Snapchat).<p>The passive capitalists are people like retired teachers in Ohio. If they voted, they wouldn't want all of that passive capital (and the job-creating power of it) going to a small geographic area. They'd rather have it spread out more: this would mean a greater number of jobs in Ohio, and it would take the rent/housing pressure off of the Valley. Of course, what passive capitalists care the most about is returns on investment. If VC were a successful investment vehicle, then passive capitalists would favor the California concentration, and what is happening would be the right thing. The problem, of course, is that it's <i>not</i> a successful investment vehicle. VC works for the careers of the venture capitalists, and the cronies they can place in high positions, but the passive capitalists whose funds are being invested in it get utterly screwed.<p>This may answer your question and, yes, many of the startups being funded right now are bogus. However, there are some that aren't. It's not all bullshit. I'd say that it's right to be skeptical, but there are companies with genuine products and strong cultures and plausible futures. It takes a lot of time to get a sense of which are which, though.