One problem is that, for a lot of industries, San Francisco is the wrong place to be.
If you want to be in fashion-tech, for example, you want to be in New York (or possibly London). And, there are lot of other industries concentrated in specific areas around the world.
Limiting to San Francisco is limiting your industry. Sure you can get a ton of web developers, but you'll lose access & relationships to the REAL industry insiders that matter for your vertical.
I think that can be true, but YC has a model that works for them, so it seems ok to me to not try to cover every industry in the world. Some of them are quite different, to the extent that YC's networks and expertise might not be as immediately useful anyway. For example Houston has a lot of energy-technology startups, especially in oil & gas, doing anything from the "hardware" side to analytics to GIS type stuff. But it's basically its own world that has little overlap with the Bay Area startup world. Different investors, different types of customers, different production challenges, different employee demographics, etc.
If you want to be in fashion-tech, for example, you want to be in New York (or possibly London). And, there are lot of other industries concentrated in specific areas around the world.
Limiting to San Francisco is limiting your industry. Sure you can get a ton of web developers, but you'll lose access & relationships to the REAL industry insiders that matter for your vertical.