At the end of the day, it's about access to capital. My wild hypothesis is if some angel investor said, "I'm going to invest 10 billion dollars in funding startups but you have to relocate to Colorado/midwest/anywhere for the first 5 years", then in the next 5 years that city will definitely "have a prosperous startup industry". Yes, you can be successful bootstrapping but it seems so much easier once you have funds to use for hiring/marketing/scaling/etc. (Note: I've never raised any amount of capital before.) In addition the "we've raised money" badge also signals legitimacy to potential employees, customers, partners.