West coast VCs are aggressively investing three thousand miles away from the valley in NYC. I'm sure being geographically closer to VCs makes it easier to raise money, but I really hope startups don't pick their location based on where VCs are. There are better parameters to optimize for.

I encourage startups to base their businesses where they'll have the best chance at recruiting the best talent. The next search engine would be well-served starting in the valley, especially if it's an ex-Google team. Similarly, storage companies continue to thrive in and around Boston, as they can draw talent from EMC. New media startups with a heavy emphasis on design-as-differentiator do really well recruiting in NYC.

By this reasoning, it might even make sense to base your web startup in Florida, if your network high-quality development talent is in Florida. I've seen this approach work well in unusual startup geographies, especially when it's a leader of an ex-team that is getting his or her band back together for second (or third) time.

Pick a geography that will play to your recruiting strengths.