I think the problem with Europe as a place for startups is not the government regulations or the immigration policy. The sources of Europe's weakness are the same as Iowa's: (a) lack of angel investors, (b) society as a whole doesn't understand or support you if you start a startup.
Whereas in Silicon Valley starting a startup is considered an acceptable thing to do (by your landlord, your girlfriends' parents, potential cofounders, etc), and there are lots of investors ready to give you money if you show the least promise.
I concur with you re: angel investors and societal support and an understanding of what it takes to build a company around technology.
But I also think a society that is vibrant from a cultural perspective is equally important -- you need a multicultural mix of art, science and liberal thought to attract the fringe elements who _think_differently_ to your environment. The multicultural aspect is necessary now more than ever considering the global context in which technology is applicable. It is these fringe elements who create startups. Both Stanford and San Francisco provide that mix to the Bay area. You could say that Iowa lacks this, as does most of the USA between NYC and SF.
In Canada for instance, there is the right cultural mix, but a lack of intelligent capital. So I agree with you.
Whereas in Silicon Valley starting a startup is considered an acceptable thing to do (by your landlord, your girlfriends' parents, potential cofounders, etc), and there are lots of investors ready to give you money if you show the least promise.