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This paper examines the role that state government can play in addressing the critical issue of venture capital—specifically seed capital. Arranging debt financing mechanisms for small business is not new to governmental development finance agencies. What is new is state government involvement in arranging early stage equity financing. This state intervention entails striking a balance between private venture capital incentives and markets, and a desire to promote public economic development objectives. An overview of the problem and the venture capital industry provides a backdrop for discussion on states' roles and how one state, Pennsylvania, has designed state-sponsored seed venture capital programs.