I'm also in the midst of creating a startup, but in canada and i can tell you location does matter. Whether its finding like minded people to partner with or finding good programmers or finding investors that know what the internet is, location is key.

If you were to go out to Calgary for example (huge oil producing town, for those that dont know it - everyone's there for oil) and tried to find someone that wanted to invest in a startup instead of oil, you'd be there forever and chances are you wouldn't find 1 person with any kind of relevant experience or knowledge. You'd be pitching to rich people without useful backgrounds. They would be expecting immaculate pro formas (which very few startups have) and would laugh you out of the room when you asked them for 100k to seed anything. 100k isnt worth their time, it costs them 400k to simply do a background check and due diligence on you.

so in short, location dictates the people that are around you and yes, that matters more than anything.