Does losing your capital (starting settlement) matter?

[TBLackey]

When you lose that settlement, you get a message saying you must retake it at all costs.

But is there really any penalty for letting the capital be captured?

[Fryskar]

Last settlement gone =attrition. Besides that, not too much.

[SBA77]

It's only the last settlement that matters, not the capital. Once you lose that you start suffering attrition until you get another one or you're attritioned to death, where you game over, unless you're horde of course. It's been that way since Rome II.

[identity]

The only thing that really happens is that you lose your oldest and probably most built up city, which can be a huge blow, but otherwise it's not important. Lots of people will play nomad games and abandon their starting location for something better. There are a few factions that don't even start with their capital city for story reasons.