[subhash]

When a good startup compares two funding offers, it does not automatically pick the one that gives the highest valuation. It has to consider the other intangibles like VC advice, contacts, good PR etc. Given this, a city offering just money is like a loser VC who's really desperate. Why would a good startup want to take that?

[pg]

Because they need the money. There are plenty of really good startups who struggle to raise money.

It would be better than taking money from a loser VC, because you wouldn't be stuck with the loser VC on your board afterward.