Why haven’t European investors fully accepted the failure is good mentality yet?

Look, I'm all for removing the social penalties to good-faith failure. I've failed before (in good faith) and I'm a good guy. Some problems are harder than they look, and sometimes the solution is brilliant but no one wants it. However, I can't share that cavalier attitude toward failure that I often encounter in the HN-sphere. I would love to see society become more tolerant of good-faith failure or just bad luck, on the small scale (R&D efforts within companies) as well as the large (bankruptcy laws, a healthcare system that isn't psychotic and mean-spirited like US insurance). However, I've also seen what bad-faith failure looks like: businesses that might start with earnest intention but evolve into long cons. People who call themselves "entrepreneurs" are not all ethical. Some are, some aren't.

Failure hurts people. Money disappears, jobs are lost, and sometimes peoples' careers get ruined. I've lost about $500,000 (mostly, opportunity cost and career retardation) to bad startups.

Sometimes failure is no one's fault and a learning experience. Sometimes, there's some serious malfeasance behind it. If you've been around tech as long as I have (and I'm only 30) you know that there are some really wonderful people, but also some really terrible people, in it.

There are some severe issues involved in the question of how to handle business failure: moral hazard, asymmetric risk. Most people attack these hard ethical questions by falling back on instinct and social proof: the way they separate bad-faith and good-faith failure is by asking around, checking references, reading news articles. That's how the Valley works: it tolerates failure if you can convince it that you failed in good faith, but the waters are so murky that social proof rules the day. That, predictably, makes the worst kinds of people (social influence peddlers) powerful, and they evolve into extortionists and manipulators. It turns into a feudalistic reputation economy. It's not a scalable solution. It's actually hypocritical, because a world in which reputation and social access matter that much is exactly the sort of world that becomes risk-averse and sclerotic. (That takes time, but you see it happening in the Valley.)

The happy medium is somewhere in between the risk-averse conservatism of Europe and the Midwest, and the pro-failure attitude of California, which arrives either at recklessness or hypocrisy. Maybe Seattle? (I'm considering moving to the PNW in 2015, so I've given this a lot of thought.)

investors dont write blank cheques is the main difference. we are blunt and dont flower up potential so monetry failiure is more relative to business size.

This nails it. You're not going to even investigate potential - your investors don't have that kind of vision (or interest). Not a snowball's chance in Hell a Brit VC would have acted as Peter Thiel did when he came on board with Facebook. Because that would have been "flowering up potential".

Or as I like to call it, vision.