Part 1: Determine Your Needs
There are many factors that can play into where you decide to start up. Many people may think that Silicon Valley, Boulder, or New York will be the obvious choices in the US for a new company. However, before packing up and moving cross-country to start an agriculture technology company in NYC, a bit of due diligence in deciding where you choose to start up could mean the difference between a strong launch and a struggle to stay afloat.
My nuclear startup experience
I work in nuclear technologies. Silicon Valley is the last place on earth I could reasonably start up in if for the fact that we would be regulated out of existence. Instead, we started up in Wyoming. I live in Colorado, my co-founder is a Wyoming native in school in South Dakota. Wyoming has a large natural abundance in the radioactive isotopes we need. There are existing companies that we have partnered with to use their waste products as a fuel at a drastically lower cost. Additionally, the University of Wyoming has business incubators and the legislature that has a select committee on nuclear energy. We personally know legislators and have been able to meet with several in person to work on strategies to work on research. The state is one of the only that is not in debt and exports energy and minerals as their primary economy. We are also close to Colorado, which has large venture firms and hubs like Denver, Boulder, and Ft. Collins on top of the National Renewable Energy Lab which is part of a series of labs pivotal to our research. The lack of water, need for backup power, recent uranium boom, sparse population, existing regulatory freedom, and friendly tax codes along with a partnership in local businesses and academia make it a perfect spot. The exceptionally low cost of living, proximity to Ft. Collins and Rapid City, and the idea of a rough and tumble nuclear generator company coming out of the Cowboy State is fairly novel to most investors, and it is a location that every employee wants to live and work in. Three of the most important aspects to consider when choosing a city to start up in are determining needs, financial situations, and overall business friendliness. For this article I will cover the first of these in more depth and the other two will be elaborated on in later pieces. Figuring this all out before making the move can really help in the long run, but please remember that the city that is the most beneficial may not necessarily be the most popular. Determining your needs as a company will be the best starting point. You will have to have a fairly strong idea of the nature and industry of your company, the customer base as well as how you will market your product and brand. How quickly do you need to expand? What sort of competition or cooperation will you have with other companies? Is that dependent on location? Once you have these basics down, then you can use them in deciding what location is best for you.
Does your location matter?
If you are based primarily out of your home, it probably will not. If you are a retail service, location can be a major factor. For manufacturing, finding a location with economical rates for rent will be your best bet. If you are offering a physical service, then you want to be in a location that is easily accessible, possibly in a major city or hub. If your service is virtual, then you should look to locations that you can find a strong workforce and that meshes well with the rest of the items under consideration.
Find industry boomtowns:
Economic Modeling is a great tool to look at industry growth over time in major metro cities. Look for the industry that best suits yours, and look at the trends over time. Healthcare will bring you out East. Information technology will bring you to any number of cities across the nation, such as Seattle or Denver or to Texas if you work in data management. If you are in legal services, you may notice a trend that there is a 3% drop in the DC area. Uranium and rare earth metals are huge in Wyoming, along with other hydrocarbon and energy based industries in the Big Sky region. Look to areas that are growing, but are not bubbles yet.
Areas experiencing industry growth often behave similarly. When the Dow Jones Industrial Average was introduced, New York was the place to be in the 20s. With the dot-com bubble in the 90s, people moved to Silicon Valley. New cities experiencing growth are outside softest development and seem to be heading towards physical technologies. Boise, Salt Lake City, Denver, and New Mexico are experiencing steady growth. These macro trends have been seen throughout the decades and paying attention to these now will pay off in the long run. Try to be in the first 10-25% moving to an area to capitalize on the early stages of the economic uptick in production without being too early to the scene before it is ready for economic growth. The better you can spot these trends at their onset, the more you will have to benefit. 
Brand image:
Is the location consistent with the image you want to develop? Each city has a personality, and if you depend on brand recognition and image for growth, this can be another important factor. If you want to portray a hip, young, company with an innovative new product that early adopters will salivate over, look to a city that reflects that. Possibly a college city. If you want a posh salon fitting for the LA celebrity scene, you do not necessarily want to put it in Omaha, NE. Likewise, you may want to think twice about putting a company in a location that is fundamentally opposite to your brand image. Alternatively, you can use contrast to brand image and local flavor if that is part of your marketing scheme or niche market. This is just something to consider while choosing your location.
Competition and cooperation:
Do you have competitors around or are you complimenting the existing economy? Starting up in a saturated region can put you at a disadvantage. If you want to open a mexican food cart in Denver, you will have more competitors than you can count. Likewise, if you want to start a software development firm and you are a dime a dozen in your area, see if you are differentiated enough from the competition to warrant a move. You do not want to be the needle lost in the haystack in an oversaturated market. Alternatively, look for an area that has suppliers that would compliment your business. If you are a restaurant owner, you want to use farm fresh ingredients that include seafood, and you are on the Gulf, look to pair with other local suppliers. If you are in need of manufacturing, look to pair up with other companies in the area that you can create a mutually beneficial arrangement with. This can help reduce costs in the long run as well as provide leads for your initial customer base.
Plan for growth:
Do you have potential to grow? Do you know where you want to expand to as you grow? Do you need a new building, a new city to expand services to, a new franchise, a new state with another unique economy, or something in between? Figure out what your plans for growth are and accommodate that. Foresight is vital to a startup, and this is one of the most important ways to assess a location. Can you grow here? Or will you have to pay to uproot and move across the nation to get to the next level?
Quality of life:
Some people want to live in the sun. Others want a buzzing nightlife and 24 hour coffee shops. Decide what type of life you and your employees (and customers!) want to live. The quality of life can often be underestimated in importance. However, if you have a CTO who wants nothing to do with cities and you live in NYC, you can imagine how unhappy they will be to uproot and work in their less than ideal location. Similarly, if your clients should expect a certain quality of life, like a life of an outdoorsman or rancher, then having an intimate knowledge of that way of life and associated needs will lend greater insight to the future development of the company. These are some of the most easily recognizable ways that needs can be assessed and applied when determining what city to start up in. The location you work in should compliment your startup and give you a boost right out of the gate. If it drags your company down then you will have extra work to do in addition to trying to earn a profit and develop a solid product. There is no reason why you cannot start at this most basic level to prepare your startup for the challenges to come. Now that the needs of the business are matched with the location, the financial needs will be compared to make sure the fit is right when it comes to the checkbook in addition to the value proposition. Has your location help your startup? Are you in your industry's boomtown? Does your startup match the personality of your city? Can you differentiate your startup from the rest in your city? Is the quality of life worth to stay or move?