Through the excellent organization of @DutchTechX, we were able to sit down with several Silicon Valley venture capitalists – from boutique firms like 10VC to multi-stage funds like Alumni Ventures, Acrew Capital, Canaan and Greatpoint Ventures. Through these conversations, we, a common theme emerged: the San Francisco Bay Area’s startup ecosystem remains unparalleled. Despite talk of remote work and rising global hubs, the Bay Area still offers a density of talent, capital, and network effects that is hard to replicate elsewhere. This first installment of our four-part series examines what makes the Bay Area’s network so powerful. We look at it through a lens of European founders and try to figure out what makes it different from the more fragmented European startup scene.
An Unmatched Concentration of Capital and Talent
Silicon Valley’s dominance is evident in numbers. Bay Area startups raised about $90 billion in venture capital in 2024 – an astonishing 57% of all US VC funding that year (Silicon Valley is so dominant again, its startups devoured over half of all US VC funding in 2024 | TechCrunch). To put this in perspective, one region absorbed more than half of America’s venture dollars. This wasn’t a one-off anomaly; it’s the product of a self-reinforcing ecosystem that continues into 2025. The Bay Area is home to nearly half of the engineering talent at major tech companies and over a quarter of all startup engineers. These people aren’t just cogs in Big Tech; they’re the founders and early employees of tomorrow’s startups.
Such concentration creates a virtuous cycle. Ambitious engineers from around the world still relocate to San Francisco or Palo Alto because that’s where the action is. As Krish Kohli from Greatpoint Ventures put it during our meeting, “SF is the place to be; it attracts ambitious people, and more connections can be made.” The presence of tech giants, top universities, and a critical mass of experienced entrepreneurs means that knowledge and talent circulate rapidly. A casual coffee chat can just connect a founder to a future CTO or an angel investor. In other words, the Bay Area isn’t just a location – it’s a network working at warp speed. We’ve experienced firsthand through the networking events that DutchTechX has organized during the week. It is hard to invite such many founders and early employees to an event in Europe, on a casual Tuesday.
Warm Intros and the Power of Community
One practical manifestation of the Bay Area’s network effect is how deals get done. Venture firms in Silicon Valley are inundated with pitches – one VC firm for example receives ~350 pitches per week – and most of those come via network referrals, not cold emails. In this environment, who you know can be as important as what you’re building. A warm introduction from a trusted connection (a founder the VC has backed, an alum from their portfolio, etc.) can move your pitch to the top of the pile. As Ben Patterson from 10VC emphasized, early-stage founders should “network with other founders” because those peers can provide high-quality introductions when it’s time to raise money. On top, these founders often already know which investors could be interested into the specific area you are building your start up, and they can provide valuable advice on the pitch and direction of your startup. In the Bay Area, such networking is a way of life: frequent meetups, accelerator demo days, alumni networks from Y Combinator or Stanford, all create a rich web of relationships. It is difficult to find a day in the week when there is no event happening. Of course, it should not be the goal to go to all, but the options are there.
This tight-knit community also means information travels fast. Good ideas (and bad reputations) don’t stay secret for long. If a founder has a breakthrough product or an outsized early metric, local investors likely hear about it through the grapevine. Conversely, investors perform back-channel reference checks through shared contacts. All investors mention the highly competitive nature of Venture Capital these days, and they all keep a close eye on potential new unicorns. The Fear or Missing Out (FOMO) is ever present. The result is a high-trust environment where, despite the size of the ecosystem, “everyone knows everyone” within certain circles. This trust underpins faster deal-making – investors might commit at earlier stages because they personally know the team or were introduced by someone they respect. Additionally, investor firms often work together. It can be that Canaan partners with Basis Set to fund a startup. From the founder’s perspective, being in the Bay Area gives immediate access to this influential community. It’s easier to grab lunch with a mentor who sold their startup for billions, or it is very possible to sit next to a founder who just sold her company for 100’s millions and is looking for the next thing to do. Those interactions can change a company’s trajectory overnight.
A Contrast in Europe: Fragmented Markets, Thinner Networks
How does this compare to the situation in Europe? Our conversations often turned to why European ecosystems haven’t recreated Silicon Valley’s magic. A big factor is fragmentation – geographic, cultural, and regulatory. The European Union may advertise a single market, but founders on the ground experience 27 different markets. Unlike U.S. startups that can roll out across a huge, mostly homogeneous country (which also is changing however), European startups must navigate each country’s rules, languages, and norms one by one (Why fragmentation in Europe is holding back its startups — and how to fix it | Sifted). As one tech CFO quipped, “Europe, despite its economic size, still operates as a collection of individual countries rather than a unified market like the U.S. This makes it harder to build companies at scale, leading to a landscape of strong local players rather than pan-European leaders.”. The upshot is that Europe’s talent and capital are spread across multiple hubs – London, Berlin, Paris, Stockholm, Amsterdam – none of which alone rival Silicon Valley’s scale.
This fragmentation dilutes network effects. Within each European tech hub, local networks thrive, but they don’t yet form one giant community. A founder in Stockholm might have great connections in Scandinavia but few ties in Berlin or Paris. There’s no single “watering hole” equivalent to Sand Hill Road or South Park in SF where the whole ecosystem mingles. Pan-European accelerators and events (like Slush, Web Summit) help bridge the gap, but the day-to-day serendipity of Silicon Valley is harder to achieve when your investors, customers, and team are scattered across countries. Even communication isn’t as frictionless – Europe has multiple major languages and business cultures, whereas English dominates Bay Area networking.
Additionally, European venture funding has historically been more regionally constrained. A Paris-based VC might focus on French startups; a Munich fund sticks to DACH (Germany/Austria/Switzerland). This is changing gradually – many European VCs now invest across the continent – but it’s still far from the borderless capital flow seen in the U.S. However, it’s worth noting that Europe’s top cities are climbing the ranks: London is now the #2 city globally for early-stage funding (after SF Bay Area), and Paris and Berlin have entered the top 10. Europe is producing larger startups and even the occasional unicorn hub, yet even Europe’s biggest tech metropolis (London) hosted only a fraction of the venture activity that the Bay Area did last year.
Also, through the discussions with the VC firms, we clearly noticed that the willingness to fund a startup is much higher than in Europe. Compounding this, the amount of investment versus equity tends to be higher than Europe, resulting in a lower dilution rate for the founding team. This in turn results in higher exits for the founders, allowing them to risk it all again on the next venture or go in angel investment themselves. This virtuous circle does exist in Europe, but typically with founders that move back to Europe after a good exit in the U.S. An example of that is the Showpad founding team, who are now building a software ecosystem in Ghent, Belgium.
Network Effects Matter for Founders
For an early-stage founder, these differences have tangible implications. The Bay Area’s network effect means that if you choose to base yourself (and your company) there, you are plugging into the world’s most potent startup network. You’ll find it easier to meet investors casually, hire experienced startup veterans, and learn informally from others’ successes and failures. On the flip side, the competition is intense – everyone is trying to network with everyone else, and you’ll need to stand out. It also means the Bay Area can feel insular; investors may favor those already “in the club” (hence the importance of getting that warm intro). Hiring also has become much more difficult, with fierce competition in finding industry experts, resulting in astronomical high wage packages (wage + equity) for experienced AI engineers. While this should fuel the hiring overseas (near- or far-shoring), VCs clearly are split on this. Some of the VCs we talked to clearly state the team should be in the U.S., claiming that talent oversees is more static (cannot be let go easily if situations change or they don’t perform) and U.S. talent performs better on a dollar / performance metric. Other VCs do not agree and have no issue hiring cross boundary or fully remote teams. All agree however that the time difference does poses challenges that new founding teams might struggle with.
Europe, in contrast, might offer you a bit more breathing room to build in the early days, and strong local support in your home market. But when it’s time to scale internationally or raise a large round, many European founders find they need to tap into Silicon Valley anyway. It’s no accident that countless European startups ultimately relocate their headquarters to San Francisco or at least spend significant time there to fundraise and access the U.S. market. As one VC in our discussions put it bluntly: European founders who relocate to the Bay Area often see a step-change in mindset and network – suddenly you’re thinking bigger and meeting the right people by default. And that point really should be driven home: thinking big is not frowned upon. On the contrary, if your pitch does not include that part of grandiosity, investors will pass you over to the next founder that does. This mentality of going big or broke really pervades the ecosystem. As one investor stated: if you are in for a 300M$ exit, we are not interested. Moreover, we will not allow you to exit at that stage, so better be prepared to make it to 1B$+ exit or go out of business.
None of this is to say Europe lacks innovation or community – far from it. In certain niche fields or emerging tech (fintech and AI in London, hardware in Munich, etc.), local networks are vibrant. But the Bay Area’s unique combination of scale, density, and openness still gives it the edge. It’s a network effect born from decades of tech companies spinning off talent and wealth into new ventures, a culture that celebrates sharing and mentorship, and investors willing to bet on the next big thing in their own backyard.
