Why don't we see more venture capital investing in Europe? One simple reason is that investors may be more risk averse in Europe relative to the US. See "Cross-country differences in risk attitudes toward financial investments" for some interesting comparisons across countries. Two conclusions were drawn on micro data across 15 countries. One there are significant differences in risk aversion, and two, these subjective risk preferences have much greater explanatory power on risky holdings than measures of market performance and volatility. The following graphs provide a good picture of the differences across countries. For a specific benefit, there is less perceived risk for those in the US versus many other countries. This is for all levels of perceived benefit. Additionally, the predicted financial risk attitude for the US is higher than many other countries.
These differences help explain why many start-ups find financing in the US. There is a greater willingness to take risk.
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