New York City, with a number of local partners has launched a $2 million seed fund called NYC Seed that will make investments up to $200,000 in local startup companies. There's been much talk about the gap in funding between angel and venture capital, and being able to get a couple hundred thousand dollars could help a lot of companies fill that gap. In a city that's dominated by financial services, it might be interesting to see some of the hedge funds or investment banks put in small amounts of capital as LP's: conferences like Money:Tech are proving there's a lot of innovation in software in that space. Come to think of it, it's something else that cities like London, Toronto and Paris might want to think about for similar reasons.
Is creating a venture fund the best way for a region to grow it's tech sector? Not sure, but it's a great start. Is $2 MM enough to start a small seed fund? Well, there're a few good examples of small seed funds (Jeff Clavier's SoftTech VC being one) that seem to make sense. Personally I'm quite skeptical of the seed-sized convertible-debt instruments that some VCs use to make early stage investments, so for me anything that helps fill that capital gap is an experiment worth playing out.