If you do choose to be here in the Bay Area as a nascent startup, incurring the costs, you will be taken more seriously by most VCs — even though they will deny this. The thinking by some is that if you can’t figure out how to navigate the Bay Area you won’t navigate your business.
Exactly.
I’d say the opposite-if you choose to move to a high COL area you’ve shown that you’re going to simply blow through more cash faster and won’t know how to reign in costs. If you live here already, that’s different.
Best solution is to start your company here with a bunch of people who want to return to your city-of-origin, get funding, and then move back. 
VC’s make their money on the few home runs. They want startups to grow as much as possible as fast as possible. I don’t think they want to see startups taking their sweet tine to eek out a living in the Midwest.
There is this crazy startup in China that in one year opened thousands of coffee shops. Indeed they have more stores than Starbucks in just one year. And they do crazy promotions practically giving out their coffee for free. Insanely capital intensive but they can do it because they are also insanely well funded by VC’s.
VC funding is a means to an end. The goal should be to take as little as possible, so you retain a higher percent ownership. Lots of rounds of VC funding isn’t a measure of success. It’s a measure of your own dilution.
How did Amazon, StarBucks and Microsoft get early funding before IPO? Seattle entrepreneurs seem to be different
AMZN and MSFT went public pretty early at very small valuations. One could argue easy access to VC money delays going public and shuts out retail investors.
VC funding, especially at early stage, is more about prestige and networks. Software startups don’t need much money nowadays thanks to AWS and open source.
I’m not sure I’d agree with that–people still need to eat and pay rent. I’d bet that the majority of the cost is salary.
Steve Jobs famously advised people to stay foolish, and more importantly, stay hungry. 
You literally just made the case that being in SV isn’t that important anymore.
Founders need to be around with the other cool kids. Like that article says VC’s take you more seriously if you are based in here instead of flying in from Iowa. Ecosystem is much stronger here too. Everything here is biased towards startups.
Research: in 2018, startups in the SF Bay Area raised $22.4B across 87 $100M+ funding rounds; startups in the rest of US raised $24.9B across 103 $100M+ rounds (@jglasner / Crunchbase News)
Do you think employees at unicorns would rather have another VC round or go public?
Nobody really cares what rank and file employees think. If they do startups will be located in states with no income tax and cheap housing. Even housing in Seattle is getting expensive.
Heck, startups here don’t even want to get out of the 10 mile radius of SF and PA. I’d love to see more startups in east bay cities like Pleasanton. The network effect is that strong.
It’s bad for employees, since they aren’t liquid. It’s bad for retail investors, since they can’t get in early. It’s bad for founders, since they give up a larger share of their company. It literally only benefits the VC firms. Everyone else is better off if the company takes less VC money and goes public earlier.
VC money shouldn’t be the end goal. It’s just a tool used to reach the end goal. Founders would be wiser to locate elsewhere and minimize the VC money they take.
Unless you’re a woman.
Then better to stay in Iowa…or go to NYC.
Iowa has no startups of meaningful scale. NYC is just as expensive as here.
Startups success rate is super low. They need every edge they can get and an environment that supports them. There are very good reasons why a big majority of them started life here.
Wish I could find the article from the female NYC founder that said SF was the worst for women, but I don’t have the URL. She went back to NYC in the end.
I can see why NYC is a better place for women than SF. NYC has much richer and more multi-faceted culture. SF is really just hardcore tech. In NYC you can be a fashion designer but uses tech in a complimentary and interesting way, like Waby Parker. SF and SV in general is mostly just tech bros.