So based on those figures London's VC per capita is in the region of $200-$300 (London has a similar population size to Israel).
The comparable entities are North America, the Middle East and Europe. Then things would change.
Individual countries in Europe, particularly the Scandanavians, have loads of small IT companies funded from VC capital and as others have said government grants. The Dutch, the UK and Germany would probably also do reasonalbly well.
Well, that makes me feel better.
For early-stage seed funding, there are also all sorts of target-agnostic entrepreneurship programs in Europe, which will kick $20k or something your way if you have anything approximating a reasonable business plan; makes it much easier to just strike out on your own without having to do consulting work to fund it. On the other hand, the fact that the U.S. has more than its share of successful bootstrapped indie-game companies suggests that either the culture or ecosystem is doing something positive there even with VCs being absent.
Israel’s venture capital industry has about 70 active venture capital funds, of which 14 international VCs with Israeli offices. Additionally, there are some 220 international funds, including Polaris Venture Partners, Accel Partners and Greylock Partners, that do not have branches in Israel, but actively invest in Israel through an in-house specialist.
In 2009, the Life Sciences Sector led the market with $272 million or 24% of total capital raised, followed by the Software Sector with $258 million or 23%, the Communications sector with $219 million or 20%, and the Internet sector with 13% of capital raised in 2009. 
roughly 78%-88% of investments that reached Israeli high-tech companies in 2001-2008 were done either by Israeli VC firms (the 38%-49% above) or by foreign or other entities in syndication with Israeli VC firms: 37%-50%.
I'm not sure when that was last updated, but Greylock has had an active Israeli office for more than two years now.
And another thing to note is that that money is in the form of military contracts with American companies. It is not used to pay for Israeli infrastructure or social services AFAIK beyond a separate chunk of money ~$40 million to help pay for Israel's immigration problem .
2. http://en.wikipedia.org/wiki/File:US_aid_to_Israel.gif (note that economic aid to Israel was stopped in 2007)
People are usually oblivious that it's another way of transferring money from the government to the military industrial complex, not just supporting the single democracy in the middle east.
Most people don't know but the most controversial weapons that Israel has used in recent years, such as the cluster bombs dropped in Southern Lebanon  and the white phosphorous used in the Gaza Strip  were both made by the US and given to Israel through the US Military Aid program.
Also very true. And it should be noted that WP usage is legal under international law provided that it is used as a smokescreen and not a weapon . And the reason it is provided by America is because it is used by NATO.
Also we give about $1.5 billion to Egypt to spend on American weapons so it's definitely not exclusive to the only democracy in the mid east.
I got my population number of Wikipedia:
So to sum up... my comment above is correct.
That Israel as a country beats us in per capita investment is an interesting figure which we should all consider.
Smaller countries tend to have more specialized and targeted economies. If Israel were to attempt to play in all the industries that the US does, they would do very poorly at almost all of them.
Much of the US economy is in large established technology and manufacturing companies, where VC no longer has a role.
I would expect that for every possible region of Israel, it is possible to find a region of similar population in the bay area that has a higher per capita VC investment.
Most Israelis are not in hi-tech industries, so it is unfair to compare SV to Israel.
I would like to see how the numbers compare for hot cities in Israel vs. the U.S., and I also think we should obviously try to raise the national number. I am not in the valley myself, so that would certainly help me!
Separately, I am not trying to be a valley-partisan, just noting that the number for silicon valley is much higher than for the country of Israel, as you would expect. I don't even live anywhere near the valley.
All these metrics are but approximations of the impossible-to-measure VC$ available/VC$ sought number that actually matters to startups. I suppose we could compare VC$/GDP$, to get some idea of how much of a nation's economy is based on startups.
But I would think that they are referring to European Union nations???
Also does the VC numbers for Israel include the population of the Israeli occupied territories or just those who have full Israeli citizenship?
Or... are these economic observations somehow self serving? Perhaps the lower levels of VC investment in Europe (per capita) are inconvenient for him: Implying European investors should greatly increase their investment levels. Would he be happy if VC levels did increase 10x to US levels... But funds were largely directed at companies that MS did not have involvement with?
The whole point of capitalism is that it's both self-serving and public good.