the basic problem, once you put aside mythology and the realities of VCs tending to fund local companies, as summarized by a friend who picked up and did a funded startup in Austin:

1. top tech talent in austin is rare and they know they are rare 2. because of (1) they can always work remotely for big valley companies (e.g., the top ten by average eng salary) 3. so if they are working locally, you are mostly going to give the top guys valley-like comp 4. the rest of the talent is cheaper

... which doesn't sound too bad, as far as it goes. But then you run into an issue. There's going to be some specific skill that you need and you simply are not going to be able to hire it locally. So now you're in the position of hiring a remote worker or trying to get someone to move. Depending on your team, your product, team communications skills, how important in-person vs. remote is, etc. to the company, real or imagined, this can basically screw things up.