The web is a great leveler, but when it comes to securing funding (in a later stage of your project) it really helps if you are in the neighbourhood of potential investors.

Other than that if you're self funded and you have a project that has a clear business driver making money from the start then it might actually be an advantage to not be in an expensive area.

First of all your retention of employees will be higher, second your cost of living and your salaries and expenses will be lower.