It's got dedicated designers, serial entrepreneurs and $2 million in cash from angel investors.

But perhaps equally important for Tapulous, a startup aiming to be the leading developer of applications for Apple's iPhones, is its location — the heart of downtown Palo Alto.

"We believe very much in building companies in downtown Palo Alto. You just run into people on the streets," said Andrew Lacy, the chief operating officer. Across from Tapulous' office at 240 Hamilton Ave., for example, is Lala, an online-music focused startup. Discussing a partnership to add music to a Tapulous application would be as simple as knocking on the door, Lacy said.

"There is nowhere else in the world you can do that," he said. And he should know — an Australian who attended business school at Stanford University, Lacy then moved to Spain but was soon yearning to get back to Palo Alto, he said.

Bart Decrem, Tapulous' co-founder, hails from Belgium but now lives in Palo Alto.

The city's downtown is the epicenter of the Silicon Valley's rich ecosystem of startups, investors and developers, he said.

Just picking up a coffee could yield a business deal. He cited the time he walked into Starbuck's on University Avenue — and walked out with funding for the startup.

He ran into former Yahoo executive Dan Rosensweig in line and had a caffeinated, successful chat about the startup's future.

Facebook employees stop into Tapulous' offices on the way to their desks down the block to discuss the applications, he added.

Sure, it's expensive, Lacy said. The startup could have an office twice as big for half the price somewhere near a freeway or in an office park. But for the closeness to other startups and innovators, it's worth it, he said.

Tapulous has cycled through four downtown offices in the last year, according to Lacy — and it plans to stick around.