It would be a pretty cheap experiment, as civil expenditures go. Pick 30 startups that eminent angels have recently invested in, give them each a million dollars if they'll relocate to your city, and see what happens after a year. If they seem to be thriving, you can try importing startups on a larger scale.
When I first moved to Albuquerque almost 15 years ago now, I heard talk of it being "Silicon Mesa". For a giant geek like me, that was exciting talk. Especially since Albuquerque was Podunk as far as I was concerned, having grown up in San Diego. (I don't think of it that way any more, so you don't have to send me hate comments.) But that talk was just hype, basically. We have good tech companies here but nothing like a Silicon Valley culture I don't think.
This idea of Paul Graham's though, could make Albuquerque into a real Silicon Mesa.
It will be easier in proportion to how much your town resembles San Francisco. Do you have good weather? Do people live downtown, or have they abandoned the center for the suburbs? Would the city be described as "hip" and "tolerant," or as reflecting "traditional values?" Are there good universities nearby? Are there walkable neighborhoods? Would nerds feel at home? If you answered yes to all these questions, you might be able not only to pull off this scheme, but to do it for less than a million per startup.
Albuquerque meets all of these criteria, to some extent. We're tolerant and pretty hip, even according to outsiders like Richard Florida of The Rise of the Creative Class. UNM is a good school, and New Mexico Tech is a great geek school and only an hour away in a city nobody in their right mind wants to live in (sorry Socorro, it's true). There are a lot of walkable neighborhoods and downtown is coming along nicely. Plus, we have an extremely low cost of living and the weather is livable, even for people like me that grew up in shorts and tshirts.
A plan like this could not only attract startups from outside of New Mexico, but it would certainly help a few startups stay here instead of living for the West Coast. Even for New Mexico, this isn't a lot of money. Paul talks about giving the startups anywhere from half a million to a million and I think we could do a lot closer to half. That would buy a good standard of living for the founders, and hardware easily. The deal could even include the big data center, BigByte, and give the startups a discount on internet access since they'll almost certainly be internet companies. Sheesh, give me and some of my friends half a million and we'd have all kind of stuff built in no time. :)
I would absolutely love to see something like this happen, just to get that startup feel in town. That kind of energy would help really get downtown kicked into high gear and would help the areas around UNM as well for sure. Yeah, it would cost millions but unless the absolute wrong startups were chosen, I don't think it could help but give back to the city.
If one of the 3 people who reads this happens to become the next mayor, get Paul Graham on the phone first thing and get this thing started!