Many famous Baroque musicians and composers, for example Vivaldi, were children of Venice and did their work there.
What other reasons are there for Venice being a great spawning ground for Baroque music?
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As @AlephZero mentioned, there was money in Venice (and the other great City-States of Italy - Naples, Florence, Milan...). That money, combined with great interest in the arts, particularly music, painting, and sculpture spawned by the Late Medieval and Renaissance periods, made places like Venice fertile ground for musicians and their music to grow and flourish:
Money means big churches that want/need musicians for religious music and wealthy aristocrats who employ and patronize musicians. At the time those were the primary sources of income for musicians. Large public concerts and tours, and of course recordings, were not yet in gear.
The music publishing business, which became another important source of income for composers also started in Venice. See: The father of modern music printing was Ottaviano Petrucci, a printer and publisher who was able to secure a twenty-year monopoly on printed music in Venice during the 16th century.. That made Venice a place that musicians and composers gravitated to, and they competed with one another for market share. That in turn engendered great creativity among musicians and composers.
(In the 18th and 19th Centuries, Vienna saw something similar, for similar reasons. Vienna was the city of Mozart, Beethoven, Brahms, and Haydn in his later years - as well as many others. The music of what we now call the Classical and Romantic Eras - roughly spanning the period between rise of Haydn and the demise of Brahms - has deep roots in Vienna.)
But perhaps the most important factor in terms of actual musical development was the rise of Opera, which lies at the heart of the music of the Baroque period. The first large scale instrumental compositions - genres like the concerto and the symphony, were spawned by Opera a genre that was born in Italy See: Origins of opera
The art form known as opera originated in Italy in the sixteenth and seventeenth centuries, though it drew upon older traditions of medieval and Renaissance courtly entertainment. The word opera, meaning "work" in Italian, was first used in the modern musical and theatrical sense in 1639 and soon spread to the other European languages. The earliest operas were modest productions compared to other Renaissance forms of sung drama, but they soon became more lavish and took on the spectacular stagings of the earlier genre known as intermedio.
Opera gave prevalence to what we call Homophony - music that features central melodic themes introduced by the singers, accompanied by supporting instruments - eventually orchestras - giving harmonic and dynamic support to the vocalists - the sort of music that is most familiar to modern listeners. Because the focal point of Opera was a story conveyed by the vocalists, the orchestra's role was principally to provide context appropriate accompaniment and enhancement for the vocalists.
From Opera, which used orchestras supporting virtuoso vocalists, the next logical step for composers and virtuoso musicians was the creation of pure instrumental music, where particular instruments, especially the violin and the harpsichord (concertos), or entire sections of the orchestra interacting with one another (symphonies), substituted for vocalists.
Inspired to a large degree by Opera, Baroque composers such as Vivaldi, Telemann, Purcell and ultimately Bach and Handel began exploring, exploiting and expanding on these new forms of orchestral music, as well as instrumental chamber music - sonatas, trios, fantasias, variations, etc. etc. etc.
Getting back to Venice, it was the place where large scale, commercial public Opera performances came into their own, during the Baroque era. See: Opera -Baroque era
Opera did not remain confined to court audiences for long. In 1637, the idea of a "season" (Carnival) of publicly attended operas supported by ticket sales emerged in Venice. Monteverdi had moved to the city from Mantua and composed his last operas, Il ritorno d'Ulisse in patria and L'incoronazione di Poppea, for the Venetian theatre in the 1640s. His most important follower Francesco Cavalli helped spread opera throughout Italy.
Indeed, 17th Century Venice was a musical center - a source of money, creative energy, and innovation - in the Baroque era.