Regions home to universities, federal laboratories, and nonprofits feature higher rates of new firm formation in high-technology sectors. This raises several questions: first, is it the presence of an institution or the amount of funding that determines local entrepreneurial activity? Second, does it matter if the R&D activities are funded by defense-related sources? This paper explores these questions using county-level data of new firm formation and the federal funding of R&D at public institutions. Among our results is the finding that R&D funds from non-defense sources – relative to defense sources – are associated with higher rates of new firm formation.