Personally, I'm not quite sure why relocation is part of the deal, either for YC or Launchbox. Seems like a way to exclude people who are not in the US, people who have strong family commitments, anyone who happens to like living where they are already. It would be interesting to see if this kind of thing could be done using modern communications rather than physical proximity, but maybe it has been tried already.
I spent a year trying to start a company from China with an angel investor and partner remaining in Canada. Suffice to say that, while there are good arguments on either side, and there are certainly special cases, I can understand why YC forces relocation, and if I were in their shoes I'd do the same. I think it's easy to underestimate the effects of frequent, face-to-face contact.
Personally, I'm not quite sure why relocation is part of the deal, either for YC or Launchbox. Seems like a way to exclude people who are not in the US, people who have strong family commitments, anyone who happens to like living where they are already. It would be interesting to see if this kind of thing could be done using modern communications rather than physical proximity, but maybe it has been tried already.