You know, that's a good point, but probably not in the direction you intended. The competitiveness of the market breeds better organizations. Businesses in uncompetitive backwaters get wiped out sooner or later when competitors brought up in a tougher environment come along.

In a market with more competition, you should either fail sooner (and that's a good thing), or end up with something approaching best globally, rather than locally.

I would venture to guess that this is not true. For most start-ups, the challenge is to disrupt status quo approaches to particular problems. That said, their main competitors aren't necessarily clones, but conventional approaches to same problem. That, coupled with consumer apathy and ignorance on both sides of the pond, means that the Europe market is not inherently easier/harder than the US market.

I think the question is still what is the best allocation of resources, and sometimes it's easier to focus on doing one thing well than to have too many fingers in too many pies.

Risk/reward. If they're easier to conquer the reward might be similarly smaller.