Y Combinator, the incubator that’s become famous for mentoring and providing seed funding to young entrepreneurs, announced yesterday that they will only be based in Mountain View, Calif. and no longer hold alternate funding cycles in Cambridge, Mass.

According to Paul Graham, one of the four partners at the company, “the reason has nothing to do with startups” (in other words, the quality of companies around Cambridge) and is actually for personal reasons. Graham and Jessica Livingston, his wife and co-partner at YC, are expecting their first child “any day now.”

Graham explained the move to California on the Y Combinator blog last night:

I think it will be better for the startups we fund to all be in the Valley. We never tried to claim to the startups in the summer cycles that it was a net advantage to be in Boston. The most we could claim was that we could mitigate the disadvantages sufficiently well — for example, by flying everyone out to California to present to investors at our Mountain View office. But we did worry that the Boston groups were losing out. Boston just doesn’t have the startup culture that the Valley does. It has more startup culture than anywhere else, but the gap between number 1 and number 2 is huge; nothing makes that clearer than alternating between them.

While Livingston is on maternity leave, her “shadow” will be Kate Courteau, the architect who designed both the east and west coast offices for YC. The dates for Startup School — an annual, YC-organized, free conference on startups which draws both successful entrepreneurs (Sam Altman of Loopt, David Heinemeier Hanson of Ruby on Rails / 37Signals, Jeff Bezos of Amazon.com), bloggers (ourselves, Mike Arrington of TechCrunch), and venture capitalists (Sequoia, former Googlers, etc.) — will also be moved to the fall.

According to Graham, “nothing else is changing.” This is great news for all the California-based companies that have already gotten funding and the new applicants from this point forward. In a comment on Y Combinator’s Hacker News site, Graham reassures all the Boston-based companies that are YC-backed by saying, “Oh, we’ll be back a lot. We love Cambridge. We’re just not going to run YC there.”

We reached out to Graham for more on that, here’s what he said:

We’ll certainly be going back individually to Cambridge a lot. I may go back to work in person on Arc [a dialect of the Lisp programming language] with Robert Morris, for example.  We’ve thought of organizing some kind of YC-related events there too, but we’re not sure what.

These companies will no longer have their favorite high-profile VCs living down the street but, being the resourceful entrepreneurs they are, they’re already finding ways to regroup and stick together. According to a comment by Ivan Kirigin, founder of TipJoy (Winter 2008 YC-funded company) on Hacker Newsr site: “There is a biweekly YC meetup at Tipjoy HQ: http://bit.ly/startup_poker.”

If all else fails, and California really is “better for the startups,” as Graham says, struggling startups may just fare better by following their leader and making the move themselves. In the end, it seems like a better deal for everyone — Graham and Livingston get to live where they want, YC will have more continued access to their funding recipients, and the new batches of startups will be enmeshed in a culture that fosters entrepreneurship.  A win-win for all.