In Asia, Singapore wants to be the answer. The government has established numerous schemes and initiatives to encourage entrepreneurs and venture capitalists to set up shop there.
Under Singapore's Technology Incubation Scheme, the government will co-invest up to 85 percent, or a maximum of $500,000 in approved startups, while the remaining funds will come from a stable of 14 technology incubators.
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One of these government affiliates is Golden Gate Ventures, whose founders moved out to Singapore from Silicon Valley. Founder Vinnie Lauria says his organization provides everything from financing and introductions, to mentoring and advice.
"We've invested in 18 companies to date and we actually work with probably a larger group of about 40 companies, mentoring, coaching [and] partnering with organizations like NUS, Enterprise Founders Institute, [and] JFDI. Most of the time, those companies end up turning into one of our investments," he said.
"Take Carousell for example, we spent 8 months working alongside of them, mentoring them, helping them with marketing, conversions, retention and then made an investment after that 8 month working relationship," he added.
Golden Gate Ventures does not take a cookie cutter approach to investing in companies. Lauria says his team is hands-on when it comes to offering advice and helping companies get started.
"We try to come to it from an entrepreneurial standpoint. Even though we're investing in companies we look at it as a partnership more than finance. Operationally, we see if we can be of help. If there's a good fit there in terms of our mentor network, we have about 40 mentors between Silicon Valley and the region. We have flown mentors out from the Valley and we've helped arrange Skype calls. We even flew Russel Simmons (of PayPal and Yelp.com fame) out to Singapore. These are people in the mentor network that our startups can use," he said.
According to data released by the Asian Venture Capital Journal, VC funding for Singapore tech companies hit $1.7 billion in 2013 which puts investment in the city state ahead of Japan, South Korea and Hong Kong. Singapore now accounts for 19 percent of total funding for Asia, up from just 0.3 percent in 2011.
Singapore's government is not only fueling the startup sector through grants, it's also trying to foster a culture of collaboration through "clustering".
The hub takes form
Buildings like "Blk71" in the Ayer Rajah area and "The HUB" in Somerset are becoming hives of startup activity.
Blk71 houses more than 100 budding companies and allows individual hackers to rent "hot desks" on the organization's website to get in on the action.
Ayesha Khanna, co-director of The Hybrid Reality Institute says these buildings give entrepreneurs a chance to rub shoulders with seed funding companies, other entrepreneurs and VCs.
"Clustering is a very important part of the startup ecosystem. Financing alone doesn't help. People coming together provides an exchange of ideas and mentorship. It's also a place for the graduates of the many polytechnics to congregate and have hackathons," she said.
"Here there are 3-D printing startups, there are software startups, there's an electric mobility startup. We know very well from the literature and research that innovation comes from interaction, cross-pollination and diversity of opinions," she added.
Khanna and her husband moved to Singapore from New York a year and a half ago. The two of them are an example of reverse brain drain, or brain gain, that's starting to become a common story among Singapore's tech scene.
"We clearly epitomize the reverse brain drain and we're seeing that in Singapore especially. A lot of not only Singaporeans, but children of expats who grew up here, are actually coming back here now. They find the environment a lot more enabling, both in terms of the regulatory framework and in providing them the emotional and financial support they need to set up their own companies," she said.
The founders of online video streaming site Viki also chose Singapore as the place to found their company, despite meeting at Harvard and Stanford universities in the U.S.
"We started in the States, in the Bay Area, but really our make or break years were in Singapore. My co-founders were in Korea at that time, but to be close to the Asian audience, which was growing on Viki, to close content deals and to be able to draw engineering talent, Singapore made sense," said Viki's CEO and Co-founder Razmig Hovaghimian.
Viki was one of about 20 Singapore-based startups acquired in 2013, bought by Japanese e-commerce giant Rakuten for $200 million.
Success breeds success
Hovaghimian says the increase in "exits" will help inspire new entrepreneurs in Singapore.
"Success breeds success, and I feel we are getting near escape velocity, but are not there yet. We're starting to see more of the big guys -- YouTube, Yahoo, MSN, LinkedIn, Uber, Facebook -- open offices here which creates a great foundation for start-ups. It's also bringing phenomenal talent in. Silicon Valley venture capital is starting flow into Singaporean tech companies, tech blogs are regularly covering tech company progress and we're starting to see successful acquisitions and exits," he said.
— By CNBC's Julia Wood. Follow her on Twitter @JuliaCNBC