An apartment works well if your co-founders are around (as roommates, or in the living room with a big table)
But it's important to have the right kind of crowd around.
If you are hard at work and all your rommie does is play XBox all day (no fingers at you pranav!) then it gets crazy.
So definitely depends on the roommate situation.
I'm doing this right now ... have a 1 bedroom and getting work done on the dining table! And it works great!
Depending on how mature the startup is, the roles keep changing. It starts with being a little bit of everything, but if you are lucky, you eventually find people who fit certain roles better than you would.
I just discussed a few examples here http://www.logic2go.com/index.php/archives/2007/03/02/
So far, the way I've worked it ... I know a few people or friend-of-a-friend.
But what are the better and cheaper web teplate design companies out there?