It's an old article i've come across, but it may be interest to some

Don’t get bitten in Spain - Times Online

Scott and Clare Doane both gave up well-paid jobs in London to move out to Barcelona. Scott. 34, set up his own Barcelona website BCNInternet.com where people can book accommodation and find out how they can pass their time in the city.

It took three months to set up as a limited company. “It’s a very bureaucratic process and our lawyers were useless,” said Scott. However, he found the British and Barcelona Chambers of Commerce a useful source of information.

Scott has launched an entrepreneurs’ support group, Barcelona Active, to provide a networking platform for other business people, and BCN Internet now employs 10 people and has a turnover of €500,000.
Their website still looks pretty up-to-date, so they at least have had some success.
I suppose a good web startup can be launched anywhere - location isn't too much of a problem nowadays - so long as you have decent internet access.