Aversion to risk. I was told by German entrepreneurs that they can get funding only when they give bank/VC/investor a collateral of the same value or if they are already profitable and don't need it anymore.

I believe Europe can create its own SV by following the USA's route: the Europe's equivalent of DoD (which has access to unlimited funds, tens of trillions of euros), needs to come up with a grand multi-decade project and invest into companies that are going to work on related sub-projects. For USA it was the worldwide surveillance system, but for Europe it may be something else, like ITER (but on a bigger scale) or micropayments system (I don't know if it would be big enough). That grand project needs to be useful and reachable, though. One thing I'm certain about is that VC-style micro investments into micro projects with micro objectives will bring only micro results.

Also that Europe lacks large pension funds that are legally allowed to invest in Venture Capital, or a large class of super-rich that will invest in Venture Capital, or a large class of moderately wealthy startup veterans that like to do angel investing (the last one is changing).

I don't know how much of a role this plays, but even with lower market rates, employing a team in Europe can be an expensive, unwieldy task. Firing in particular seems to be a lengthy, drawn out process. I don't think that's a bad thing, but I can imagine how a significantly increased cost for every bad hire might increase the risk profile of a small startup.

Because Europe is not at all competitive for tech talent. Fresh graduates earn significantly more money in America than senior-level developers in Europe, with the quasi-exceptions of London and Switzerland (neither in the EU).

Why would European developers allow themselves to be shafted out of millions of dollars by staying in Europe?

There are lots of theories.

One of the main ones is that national policies around employee equity vary throughout Europe and are often severely disadvantageous (particularly Spain and Germany). Lots of European entrepreneurs are calling on policy makers to both normalize this within the EU, as well as making the policies competitive (e.g., [1]).

Of course that statement misses some of the “why not < state in the US >”. The tax treatment in other states is the same, and several have similarly employee friendly policies. If anything, Seattle has become a clear rival to San Francisco, and has restrictive employee policies with regards to non competes (c.f., Microsoft used to sue high profile transfers to Google, Amazon sues ~everyone who leaves AWS, etc.).

I think the combo of those things suggest that it comes down to density and freedom of movement. Silicon Valley leapfrogged other places thanks to Shockley => various forks => Intel, Apple and others offering serious equity (the Boston scene didn’t keep up on this front). That fed on itself over and over again, leading to persistence. Seattle is now a powerhouse as a legacy of Microsoft and then Amazon, and all the folks that have come out of it.

By contrast, Europe has only had a broad single market for ~30 years. But it’s still super fragmented both in terms of laws and some would argue more importantly by language. 45 years ago when Apple and Microsoft were founded, they were able to hire any engineer in the US (and beyond) that spoke English. By contrast, most European companies were highly national with fairly minimal migration between countries.

Europe is closer now to the conditions of the initial Silicon Valley setup (freedom of movement, access to knowledge, everyone speaks a common language), but its decades behind in terms of a history of successes. I believe that the companies spawned from Spotify employees, and so on will spread throughout the European startup scene. But it still takes time.

tl;dr: Europe still has some structural barriers, and just a much “younger” startup scene.

Edit: plus it’s always important to remember that post WW2, most of Europe was spending its time recovering from the war.

[1] https://notoptional.eu/en/policymakers

Maybe it's because Silicon Valley occurred first, and then oppressed most of Europe's "native" companies?

It seems that there are some massive sources of wealth for tech companies, such as search, social networks, and e-commerce companies. In Europe, these have all been supplanted by Google, Facebook, and Amazon respectively.

In China, on the other hand, these companies were free to grow and establish their own nexuses of tech talent. As a result, China is the closest to having the Silicon Valley of <x>.

Perhaps Europe should take a page from China's (and the US now, I suppose) playbook?

AFAIK non-competes are enforceable in Europe, unless they're unreasonable.

To pile on, Europe also makes it difficult to raise venture capital funds—particularly smaller micro funds as the startup cost is so high. Europe is going to regulate their way back to the dark ages.

IMHO it is much more connected to lack of capital.

Lots of money, private and public (DoD)

The reasons are:

1) The California employee rights, which allow an employee to resign and start a new company in the same area. Boston doesn't have an IT industry because of their onerous non-competes, even though DEC and Wang were located there.

2) European nations often have onerous pension requirements that must be met even before hiring a new employee.

3) Silicon Valley has willing investors.

4) Governments across the world prefer dealing with large entities because of the overhead in dealing with multiple companies, so without the right startup culture, new companies just won't happen.