Tapping City-based Capital Coffers New York and other cities are launching their own venture funds. Are they good for your business?

New York City tech companies in need of cash now have a new option: the New York City Entrepreneurial Fund. In May, Mayor Michael Bloomberg announced the $22 million fund, which the city operates in conjunction with FirstMark Capital, a New York-based venture capital firm, as part of a broader economic development initiative. The fund, which includes $3 million of the city's investment and a pledge of matching support--often in multiples from FirstMark--funds seed-stage technology entrepreneurs, for as much as $750,000, while providing mentoring and support.

FirstMark CEO Lawrence Lenihan says that the fund has made one investment and has two that are in "deep stages of due diligence." The fund has many more in the works, he says. Companies apply through the fund's website, firstmarkcap.com/firststeps.

This isn't the first time a municipality has dipped its toes into the VC pool. In 2007, San Jose, Calif., put up $3 million of its taxpayers' dollars into a similar fund. In 1989, the Connecticut Legislature created Connecticut Innovations, a municipally backed investment fund, through which it says has returned more than $510 million in gross state profit and added 5,000 job years to the state's economy.