While yes- the military did play a sustaining role- there's some degree of serendipity. A huge number of Silicon Valley companies can be traced back to Fairchild Semiconductor in one way shape or form.

http://www.computerhistory.org/atchm/fairchild-and-the-fairchildren/

The military contracts in the area brought a great deal of engineering talent into the area. William Shockley- one of the co-inventors of the first transistor- set up Shockley Semiconductor in the bay area- specifically because his mother lived in Palo Alto. It just so happened that 8 of Shockley's researchers decided to split from Shockley to form Fairchild Semiconductor (Known as the traitorous 8)

Fairchild became the company tapped by the US Government to build transistors for NASA in response to sputnik. Several of Fairchild's original employees went on to found Intel and AMD.

Even today, In-Q-Tel which is widely considered an investment firm in support of the CIA and other intelligence agencies has made major initial investments into many modern companies- e.g. Keyhole Inc (google earth), Palantir, FireEye, Oracle, Cloudera, NetApp, you can look at the full list here- https://www.iqt.org/portfolio/ but the vast majority continue to be in the Bay Area.