Draw a 50 mile radius circle around Stanford. Get a list of all consumer startup acquisitions in the last 2 years. Put a pin in the map for each acquisition. (This is straight from the mouth of Ron Conway, so apologies to him).
Rinse/repeat for VC investment (which is nearly required for any consumer startup)-- it turns out that VCs tend to invest in Valley companies (because that's generally who they can meet face to face).
If your target path is VC and then acquisition, I'd say proximity to Google is a pretty good idea, wouldn't you? Throw in Yahoo, Ebay, and the many other big players who like to buy companies as a bonus.
The point is-- It's way easier to get funded in the Valley (I'm raising money in the Valley and Seattle right now, so I'm speaking from a bit of experience).
And the data seems to show that it's easier to sell your company if you're in the Valley (which is the only realistic path to liquidity for founders/investors). Even if the data didn't confirm it, it makes SENSE, doesn't it?
I don't know. The last big VC-funded company I was with was in Ann Arbor, MI. When the valley influenced the rest of the VC-backed or acquired companies I worked with, it did so by moving the established company out to California. I've never worked for a company whose opportunities came simply from being located in California.
Meanwhile, the elephant in the room here is that you aren't going to be acquired by Google, in the same sense as you are not going to win the lottery. There's a get-rich-quick mentality behind web startups that is totally not borne out by the numbers, and it cuts both ways: unrealistic hubris that infects judgement (for instance, by moving teams out of comfortable environments to San Francisco), and devastating emo temper tantrums at minor setbacks, like not being accepted into YC.
