This paper analyses Amsterdam’s Startup-in-Residence (SiR) programme as new type of policy to engage startups in the development of urban innovation through a challenge-based public procurement of innovation (PPI) process. The programme is being mimicked by other cities and government agencies, but so far there has not been a rigorous, theoretically-informed analysis of the approach. In this paper, we specify and focus on the role of city-based, public-affiliated intermediaries as initiators, moderators and influencers of conversations between startups and the local government. The main contribution of SiR as a PPI intermediation programme has been to launch new types of fruitful conversations on several levels, that lead to institutional innovations rather than direct solutions for urban problems or startup development. In this sense, SiR fulfils a role inquiring and ascribing urban challenges with values and notions of “worth” that preceded and shaped innovation directions. We also suggest that engaging startups is effective for only a limited bandwidth urban challenges; different types of intermediation are required to foster collaborative innovation in more complex settings.