When you know you won't become homeless due to a failed venture it becomes easier to take a chance on something.
For a country with roughly the population of the Chicago metropolitan area Sweden punches well above their weight in everything from startups to pop culture influence[0] to the point where the referenced article calls Sweden "the unofficial capital of pop music".
Turns out when you have a safety net it's a lot easier to make the jump to forming your own startup vs the US where if you leave your job the first step is to figure out how to get healthcare (and pay for it). In the US you're much closer to complete ruin if you leave a job to pursue your wild startup idea.
[0] - https://www.thrillist.com/entertainment/nation/this-is-pop-n...
I think you are overindexing on the safety net part. Here[1] is a chart of startups per capita in Europe. Looking at "startups per 1M inhabitants", Estonia has 1100+ while Germany has only 250 in spite of having a great safety net (apparently).
Same article also shows that Sweden has 1769EUR VC funding per capita, when Finland has only 854EUR and Denmark/Norway don't even show up on the chart. All 4 countries have similar cultures, no?
And let's not even talk about Saudi Arabia which spends a lot on social safety net but I haven't seen much entrepreneurial or artistic exports from that country (oil doesn't count).
I believe "forming your own startup" requires a lot of ingredients - ecosystem or flywheel (see: Silicon Valley), funding for risky bets (see: USA), a bit of hunger, education levels, culture of risk taking etc etc.
[1]
Also, for things that aren't purely nebulous (not just thinking of finance here) you can't just go out and start anything anywhere. If you start something in Norway you'd better not rely on cheap local labour, but you might gamble on cheap electricity. Saudi Arabia just has no comparative advantages apart from oil and Hajj tourism.
An actual advantage that I think Sweden has, is the combination of a highly educated and highly creative workforce. Your stereotypical Swedish engineer isn't just educated for economic reasons (because if it was about money, he could have done a dozen easier things anyway). He also has some serious creative ambition. If you are rich enough to pay him and clever enough to steer those ambitions down a profitable path, you can make a ton of money on people like that.
That's why I counted both startups and funding received by those startups.
High taxes and a welfare state do of course have some role to play (positive and/or negative), but as you say there other important parts that probably matter more.
One thing we can say empirically is that Sweden have had it difficult to create large sustainable companies from startups like it did hundred years ago, Spotify is a notable exception.
Safety nets, be that a psychological one ( the US with the American dream ) or a welfare angle (sweden, Norway etc) but what seems to be truest or at least in my observation is the psychology of the country in terms of its approach to supporting startups of all flavours matters more. This means,broadly, it being considered an acceptable and successful route of learning business and is not a hyper risky endeavour.
In stable global north countries, it was, historically, considered a radical act to not join a big national or even multinational company. Hell, the terminology of the description tells you the sense of import that we held for the the large beasts of industry.
This all radically shifted with the advent of software, games, websites, SaaS, PaaS etc etc.
It was perceived, over the last 40 years, no longer risky to be in computers, but very wise, and a smart move.
With this rise of the geeks, then came adjacent entrepreneurial activity, fancy coffee shops, better food, etc
Now,this has probably played out one way or the other on every country.
What I have seen, is that entrepreneurs are more present and more numerous than ever, but there are numerous obstacles in their way.
Import limits, sending money internationally, basic banking, travel restrictions, gender limitations, sexuality limitations, freedom of the press, dictatorial governance with a lot of religion as the policy.
These are the limiting factors to growth. Investors will always invest, we can derisk it somewhat with tax breaks, but money makes money.
Ultimately what's designs a great startup ecosystem is excellent people making excellent things with or without government assistance and working together, as a cohesive unit to celebrate and champion making cool shit for money. Be it coffee, be it BBQ, be it software, be it yoga.
Independent businesses require a state that trusts its people, and the people trust the state.
Germany is an odd example, but from my experience with German entrepreneurs is the risk tolerance of Germany investors is very very low. So it's get customers then get money. However, that said, Germany has produced a few good businesses so perhaps there's a method!
It can never be one size fits all when it comes to creating the perfect environment, much like gardening, you've got to work with the strengths of the plot, the soil, the weather etc.
However, if we all think we should replicate the valley on our respective locations then we're truly missing the strengths and values of our communities.