Micha Benoliel grew up in France and launched his first technology startup there, but he never forgot the atmosphere of adventure and optimism in San Francisco, where he studied in the early 1990s. So when he came up with an idea for a smartphone app that could send messages without Internet or cellular connections, he went back to California in 2011 to pursue his dream.

"I knew the only way to change the world was from here," says Benoliel, the CEO of Open Garden, the maker of the FireChat messaging app. As technology upends industries and lifestyles at breakneck pace, the Old Continent is not producing any of the online giants like Google, eBay or Facebook. Its best and brightest prefer to emigrate to Silicon Valley, or sell their ideas on to U.S. firms before they have a chance to establish themselves. The European Union's top executives in Brussels are trying to rectify that with a long-term plan of reforms and incentives but face an uphill battle. The 28-nation bloc is, above all, lacking in the risk-taking culture and financial networks needed to grow Internet startups into globally dominant companies. "In the U.S., especially in Silicon Valley, they are up for any crazy idea," said Benoliel, 43. "Successful businesses often come from crazy ideas."

Europe's relatively cautious attitude to investment stands out as one of the biggest hurdles and among the most difficult to change. Investors in Europe want to see that a young company can generate revenue from the start. Europe's many high-technology companies are focused on manufactured goods that can be sold right away to generate revenue industrial equipment, energy turbines, high-speed trains, medical devices, and nuclear energy. By contrast, Internet companies often have little to no revenue at the beginning. Twitter and Facebook, for example, first focused on building up their user numbers. Only once they were established as global forces did they put more attention to making money, through advertising and other strategies. This difference in mentality stands out as one of the key reasons that Europe has fewer venture capital firms and less investment in startups than the U.S. or Asia.