Really, this is already being done on a larger scale -- by setting up shop in Seattle, you alienate (or, properly stated, created a hurdle for) people from Silicon Valley, New York, or London.
As long as you set up somewhere with a large enough talent pool to hire the number of people you need, you're fine. While Microsoft and Google are over in Redmond, Seattle proper has plenty of talented software types at companies like Amazon, Real Networks, and Boeing.
Locating your startup in Skykomish or Roslyn would be a different story.
Gus Mueller from Flying Meat is looking for a Mac developer who's willing to work in downtown Everett.
If I lived in Everett, I'd jump at the opportunity to skip the I-5/405 commutes. Of course, since I live in Capitol Hill I won't consider applying for his open position.
I left Microsoft a few years ago to join a company in Seattle. Not having to cross those bridges any more was a HUGE part of the reason why I left. I cannot express how awful the commute is to and from Redmond.
Of course, getting a raise and working in a 15 person startup didn't hurt either... These days, I'm working out of a cafe two blocks from my apartment. My daily commute time has gone from 90 minutes by car to 30 minutes by bus to 5 minutes by foot.
Were you driving yourself? When I was at MSFT I used to take the 545 back and forth, and did a fair amount of reading, coding and movie watching in that bus.
Not that I wouldn't appreciate work within walking distance, but transit made it reasonably pleasant.
I live on Capitol hill. 545 in, and MS commuter bus back is fantastic. The ensured reading/downtime everyday is wonderful. The only downside is the restrictive times on the commuter bus and the lack of a vehicle at work to run errands. I'll shortly be moving to a house walking distance to MS and the reading time of my commute is something I'll greatly miss. I'm seriously thinking I might (on some days) take the 545 in to Seattle to get Vivace coffee and take it back to MS to get to work.
I live near the Group Health on 15th and John, so when I would take the bus I'd take the 43 to Montlake and transfer to the 545. It usually took less time to just drive, even though it was far more stressful than taking the bus.
I left MS about a month after the commuter bus program started, and I thought it was awesome, but it still didn't compare to hopping on the 10 and getting off in Pioneer Square.
Sounds like there should be an app for that. Talent in any industry could create a skill and geographic preference profile and then startups could see where all the talent wishes they could work.
They could integrate apps like the total cost of driving (http://earliertcd.appspot.com/) and show people concretely how much their time is worth.
As long as you set up somewhere with a large enough talent pool to hire the number of people you need, you're fine. While Microsoft and Google are over in Redmond, Seattle proper has plenty of talented software types at companies like Amazon, Real Networks, and Boeing.
Locating your startup in Skykomish or Roslyn would be a different story.