What is the best geographical location to do business?

Do business first where you'll be happy to live. Family comes first. Really.

Second, where your network is strongest. Networks are how you find the best employees/co-founders, possible funding, advice/advisors, and alpha-testers.

This really depends on your business model. If it is not consulting or on.site development, you are obviously more independent of the location of your potential customers. I like Jason's advice: family first, network second. If you are member of a church, count it as family.

Which size of business do you want to accomplish? Do you need developpers? It helps if there is a community of developpers nearby - or the place is so gorgious that they are willing to move. This again depends highly on the culture you live in. Europeans are less likely to move for the job.

Anup talked about other important aspects like economic stability and available money. If you need investors, they will value availability of human ressources, office space, intellectual property.

Just remember: it is your business. Do it were you like it.

Paul Graham is a bright guy, but his advice in this case is foolish. There are successful IT startups all over the US and in fact all over the world. I'm not sure that 'culture' (if it really matters at all from a pure business point of view) matters as much as a good talent pool, a decent local economy, the ability to connect with investors. US cities such as Austin TX, Ann Arbor MI, Columbus OH, New York NY, Raleigh/Durham NC, just to name a few examples, offer all of the above -- see also http://www.usnews.com/money/careers/articles/2009/09/15/10-best-places-for-tech-jobs.html for more examples. Consider also the availability of repected universities as both a source for talent and a source of technology collaboration.

With high-speed internet/voice/video available nearly everywhere now, it's much less important to be physically collocated next to everyone else. Silicon Valley is still fine for business and a great place, but it's not the only game in town any more.

Best of luck!

I tend to agree with Paul Grahams advice. Is it impossible to do a tech startup outside of silicon valley? Of course. But all things being equal, you'll have an easier time there. Doing a startup is difficult enough as it is. If it's feasible, you should probably try to move there. If not, it's not the end of the world. Just get around as many like minded entrepreneurs as you can and make do with what you have.

You need to be around like minded people in order to improve your chances of success. However, improving your chances does not guarantee your success. You need to find a balance between your financial ability and your need to be in an area like the Valley that provides intangible resources. If you have plenty of funds to burn through and can afford the location but don't have a great team, then the Valley is for you. If you have a great team and good resources but not a lot of funds, then stay where you can afford. The bottom line is; The pro's and con's for the perfect location are different for every business model, you need to work that out on paper and make the decision that is right for the growth and success of your business.

For tech startups, the San Francisco Bay Area is, by far, the best place to be. You have to watch out for the "echo chamber" but there's a reason why the vast majority of successful startups are from Silicon Valley (I think you've probably heard of them: HP, Sun, Intel, Apple, Yahoo, Google, Ebay, Etrade, Paypal, Youtube, Facebook, Twitter). The two other companies on our floor moved from Boston and LA after thinking that those cities were OK. I can assure they now understand the huge benefits of being in San Francisco.

CNN Money did a writeup last year listing 100 of the best places to live and launch. I think it was limited to the US though. Gave some good tips on what each area had to offer. I think the key things to look at are local talent, infrastructure, government incentives, and presence of business incubators. Why incubators? This shows that the area is conducive to startups and encourages their presence.

Oh, found the CNN link: CNN MONEY

I personally feel that web related business can be started anywhere in the world because a person living in india knows the pain of indian lives and will think of starting a business and a person staying in usa knows pain of the people living in their country so they will start building products useful for that.

Social applications can be built anywhere in the world and market to anyplace in the world.

Custom development companies can do anywhere in the world because their online presence will give client an essence and also recommendations from their previous clients will be helpful for them

Coming to investors every country do have investors but usa does have more investors and they only invest in other countries after business grows and even if a person doesn't stay in usa he can get funding from local people once business grows and once business show some sort of returns .

SO ultimately a person should start business where his/her target is and also he needs to get support from family