We start with one person in guard, or occasionally, with side control. If we decide we want people to have to work for position, we have them start on their feet (though some clubs won't have the mat space for this). Sometimes we start off giving one person a free throw, where the action starts as soon as the person being thrown hits the ground (its considered bad form to drive the person with the free throw of course).
Starting on the knees makes no sense, its not good for groundwork or standing - that is, wrestling off your knees for a 'takedown' has almost no transferable skills. Either start from a real ground position, or start on your feet.