There aren't a lot of consumer-facing web/software startups like in the Valley but there are startups working on pure technology problems in fields such as microelectronics, transportation, aeronautics, etc.

Try doing a startup in Eastern Europe. That is really painful, believe me :)

Especially when you lose your Internet connection for days at a time because someone has stolen the copper in the wires....

I rarely experience long internet connection unavailability here in Ukraine (mostly due to thunderstorms or isp's hw problems), and even if I have such a problem, I always could use quite cheap CDMA 3G internet connection. So Internet connection isn't a real problem here for doing startup. We have other problems over here :)

Funny you say that, because my comment was actually in reference to a guy from Ukraine that the US company I work for has employed several times. He would just suddenly disappear for a week or more, and then when he finally came back, on one occasion, he hadn't been able to connect to the company because of the circumstances I mentioned above.

Sounds like falsehood. If he really wanted to go online, lots of ways were available: CDMA 3G [cheap, though requires approx. $200 hw expenses], GSM GPRS/EDGE [usually expensive], dialup (relatively cheap), internet cafes (quite cheap), TV cable company, other ISPs.. so...

I've read that Estonia is quite startup-friendly these days. Is your experience different?

Given that Steve Jurvetson is Estonian, I wouldn't be surprised. There must be something in the water in that country - it seems 'produce' an inordinately large number of brilliant people.

Estonia could be friendly, though I'm in Ukraine.