Looking at that map, I'm struck by the separation into the "San Francisco cluster" and the "Silicon Valley cluster" (with the exception of ZumoDrive, sitting halfway in between).
PG: Have you noticed this causing any effects within YC cohorts (e.g., the cohorts being split into two cliques), or is there enough traffic between downtown and the valley that the physical separation doesn't end up mattering?
Different founder personalities choose the city or valley. Funky hipsters want to live in the city, head-down coders choose the valley, and many are pulled both ways and have to make a hard choice. Rather than the geography causing cliques, I think personality types determine both geography and friendships.
There is a kernel of truth in this, like in most hasty generalizations. We definitely fall in the "hard choice" category.
From our Mountain View house we, too, made fun of San Francisco "funky hipsters". Now that we're in the city, we realize that, surprise! We're not the only head-down coders in town.
Would it be fair to say that valley startups are more likely to tackle hard technical problems while city startups are more likely to tackle hard non-technical (business, marketing, etc.) problems?
Yes. It's somewhat rational. The city keeps you more in touch with urban culture, the valley gives you fewer distractions. The talent pool is somewhat polarized, with more graphic designers & marketers in the city and more hackers in the valley, so depending on your hiring needs it may make sense to prefer one or the other.
It's a shame the commute between them sucks so much.
Price plays a big role too. As your company grows you'll find that the valley has cheaper offices, cheaper housing, and cheaper food. Caltrain is decent for your employees in the city, and Mountain View is tolerable for your employees in Santa Cruz.
PG: Have you noticed this causing any effects within YC cohorts (e.g., the cohorts being split into two cliques), or is there enough traffic between downtown and the valley that the physical separation doesn't end up mattering?