Those are fair points but I think there are some important details that are missing.

1. There is no European VC market. This is important. When people talk about EU VC funding they are just adding together national numbers. In reality EU countries have seperate capital markets with different rules serving seperate national markets - when it comes to services there is no single market. This means none of the European markets come close to having the scale of the Chinese or American ecosystems.

Even though the amount of VC funding of the EU as a whole may seem to be of similar order of magnitude, being around 1/3rd of US VC (although as I wrote above, this is a virtual number) there are several important differences. About two-thirds of European funding is provided by governments or (risk-averse) banks, whereas about two-thirds of US finding is from private sources that are comfortable with higher risks and long periods of unprofitable money shoveling (see Amazon, Uber, Tesla).

Furthermore, there is a large difference in the size of funding (about 5x bigger in the US per company) and the amount of it being for late stage growth (very little in the EU). These are big barriers to creating 'big winners' in winner-takes-all markets.

You raise a valid question about the direction of causality here. It could be that European companies are just inefficient because they are overburdened by regulation, and investors know this. I think that is probably partly the case, and definitely in some sectors.

However, there is some evidence that regulatory burden and productivity are currently not the limiting factor. First of all there is quite a lot of diversity in regulatory burden and productivity between countries in Europe. But regularitory burden and productivity does not seem to correlate much with the size of the startup markets in Europe. The biggest startup markets are found in the capitals of the countries with the biggest markets (Germany, France and the UK). These countries are not known for being particularly business friendly or efficiënt, but they are the biggest countries. It seems likely that network effects and market scale are dominant forces here.

Indeed, it seems that the higher cost and complexity of having to scale internationally across different regulatory domains are a bigger problem for potential European big winners. A company that wins scaling in the US dominates the biggest market in the world and is likely to be the global winner. National big winners in Europe do not have the size to compete, unlike those in China. And establishing Europe-wide winners is difficult.

(In fact, it is mainly European business that push for moving regulation from the national to the European level, precisely to make Europe-wide activity easier)

One more piece of evidence is that the US VC ecosystem is centred in SF, California, probably the place in the US most burdened by regulation. They even suffer from a GDPR-light.

2. The big correlate for profits is size and Europe has very few very large companies that are of recent vintage. However, those big companies that do exist have similar profits to large US companies. If you think there is some hard limit I'm curious to hear what you think is the mechanism.

3. Maybe, but this kind of funding always comes with the art of writing the right words, doing the right compliance, and sometimes knowing the right people and having a big and well known name. But maybe I was a bit too black-and-white.