Santa Cruz can be a good option for some kinds of things.
Pros: Lower housing/office rental costs than most of SF/SV, nice ocean, less crowded coffee shops, lots of UCSC students willing to work as cheap summer interns in return for not having to commute across the hill, lower salaries for senior engineers for the same reason if you find one[1], substantial local indie-gaming startup scene (Team Meat, Chronic Logic, Gaijin Games, Graeme Devine), laid-back lifestyle.
Cons: Further from the VC and most of the tech/meetup action, SF/SV people consider it infinitely far away, harder to find senior engineers, few local peers if you aren't in the indie-game space, laid-back lifestyle.
[1] There are a lot of engineers who live in SC, either because they prefer it to living in the Valley, or because they already established families there back when there were more tech jobs (SCO, etc.). Most now commute to Mountain View, San Jose, or Cupertino, but many would take a substantial paycut to not have to make that commute every day, which seems like a potential arbitraging opportunity for the right startup.
Pros: Lower housing/office rental costs than most of SF/SV, nice ocean, less crowded coffee shops, lots of UCSC students willing to work as cheap summer interns in return for not having to commute across the hill, lower salaries for senior engineers for the same reason if you find one[1], substantial local indie-gaming startup scene (Team Meat, Chronic Logic, Gaijin Games, Graeme Devine), laid-back lifestyle.
Cons: Further from the VC and most of the tech/meetup action, SF/SV people consider it infinitely far away, harder to find senior engineers, few local peers if you aren't in the indie-game space, laid-back lifestyle.
[1] There are a lot of engineers who live in SC, either because they prefer it to living in the Valley, or because they already established families there back when there were more tech jobs (SCO, etc.). Most now commute to Mountain View, San Jose, or Cupertino, but many would take a substantial paycut to not have to make that commute every day, which seems like a potential arbitraging opportunity for the right startup.