I wasn't (and am not) running a startup so I asked some friends who were (and were using Java). I never got a satisfactory answer (but I got some surprising answers including "If I were 5 years younger I would be using Scala or Clojure but I am very productive in Java and don't have the energy to learn new languages"(!!)). Another interesting answer I got was that their startup focused on business value but needed only average programmers (I am just reporting what people said) and could very well work in Java. All answers tended to "Sure Java is inferior but there are mitigating factors."
Fwiw, If I were to ever start a business where software was a differentiator I would use (a) Scala (if JVM/libraries were important) (b) Haskell + C or (c) use a custom Scheme variant I've been hacking on for many years + C.
I personally think the fears of not getting good programmers if you build in unusual languages is overblown. Even in Bangalore, good programmers would jump at an opportunity to work on interesting systems and interesting languages. I am not looking for work but I would still consider a job offer from a startup using interesting languages very seriously.
[1] I was trying to figure out stuff by writing and so these posts are not polished, but if anyone wants to read, here they are
http://pindancing.blogspot.com/2009/07/why-do-startups-still...
http://pindancing.blogspot.com/2009/07/why-do-startups-still...
http://pindancing.blogspot.com/2009/07/why-do-startups-still...
http://pindancing.blogspot.com/2009/07/why-do-startups-still...