Seriously, I hope that %50 of the "benefit" of YC is not moveing to an expensive location where every resource you could need for a business is constrained.
I've seen no evidence that locating outside of SF or MA reduces your chances of success. (Though this is often claimed, of course.)
Every resource except:
Money. The Valley has money like you wouldn't believe. Everything worth anything gets funded. If you can pull out a nice demo and sign on a few paying customers, you will get money--more than enough to make up for the cost of living.
People who understand what you're doing. There are dozens or hundreds of "startup" attorneys here...and nowhere else. There are dozens or hundreds of "startup" accountants here...and nowhere else. There are always events happening that will bring you into contact with other entrepreneurs.
I've started a company outside of the valley (started in Houston and moved to Austin, which is no slouch as far as technology goes) and I've started one in the valley. The valley is better.
The stats point to a change in percentage chance of success for any incremental distance from Palo Alto/Mountain View that a venture funded company is moved. (I don't know the numbers offhand - but it's significant, even down to whole percent numbers per 10 miles if I remember correctly)
From someone who's recently been talking to many people about the choice to live in Boston, Mountain View/Palo Alto, San Fran - or somewhere else, every person (investor/entrepreneur/historian) points to MV/PA.
Many people (and firms like Sequoia ...etc) won't invest unless you're in the valley.
The fact of the matter is, there are many very successful startups in Seattle, Portland, Chicago, New York, Boston, Houston, Dallas, Los Angeles, etc. etc. etc.
People in the BAY AREA think that the BAY AREA is necessary for success for a startup.
But they are not taking from any kind of a scientific knowledge.
Its just provincial arrogance.