Same reason Y Combinator doesn't have a bigger presence in the "Rust Belt"? Network effects.
If all the people are already on the West Coast what incentive is there to encourage relocation away from the West Coast as opposed to the continual brain drain from the rest of the country out to the West Coast?
Coastal cities have other advantages too. Better weather, favorable access to trade, better access to travel. Software could arguably be made anywhere but that severely discounts the importance of face to face communication. It's "only" a 4 hour flight from SF to Kansas City but if you're in KC and trying to work with partners in Asia that's an extra 8 hours of travel for each trip which effectively costs you a day. Make that trip several times a year and that cost becomes untenable.
>If all the people are already on the West Coast what incentive is there to encourage relocation away from the West Coast as opposed to the continual brain drain from the rest of the country out to the West Coast?
Well, it's not true that "all the people are already on the West Coast", but even if it were, YC might awaken to the obvious truth that rapid population growth in west coast cities is not sustainable for much longer. Then, as a forward-looking, long-term thinking company, they might see fit to establish footprints in some of the less crowded, less expensive inland cities before someone else beats them to it.
Personally, I don't understand why people who have skills that are marketable in virtually any city in the first world choose to live with roommates in crappy century-old homes or tiny apartments in a handful of coastal cities. To each their own, I guess.
"Personally, I don't understand why people who have skills that are marketable in virtually any city in the first world"
Because, in reality, there are only a handful of decent cities that offer a plethora of jobs, interesting ones at that. Sure, a bunch of techies could move to Columbus, but there you have worse weather, more sprawl, fewer job options, and for those who do want to start their own company, a dearth of VC money.
Get YCombinator to open branches in the midwest, and you'll start to see that change. Until then, it likely won't.
For career driven people, it's not enough that just some company will hire them for something. And there are very few cities where it's easy to find a job matching the skills and expertise of e.g. a Microsoft tech lead.
Much less cities where you have the opportunity at multiple such large companies. Seattle has Amazon's HQ as well as Microsoft's, and presences from Facebook and Google.
You can be a Microsoft tech lead in Raleigh-Durham, too, but you aren't going to have as many opportunities with Amazon/Facebook/Google/etc there.
If all the people are already on the West Coast what incentive is there to encourage relocation away from the West Coast as opposed to the continual brain drain from the rest of the country out to the West Coast?