In this article, we explore the relationship between innovation policy and new venture creation in the United States. Specifically, we examine two components of innovation policy in nanotechnology—science and technology (S&T) initiatives and economic initiatives—and their relationship with the founding of nanotechnology firms. We find strong support relating new firm formation to S&T and economic initiatives. States with both S&T and economic initiatives had six times as many firms founded than those states without such initiatives. We also find evidence of a first-mover advantage as states with the earliest innovation policies had higher rates of related firm foundings over time. These findings suggest that states that are most attractive to entrepreneurs not only pursue technological innovation and provide resources, but also encourage and legitimize commercial development. Implications for public policy makers and scholars are provided.