Can city administrations benefit from the entrepreneurial spirit of startups, and create better urban solutions with their help? In this paper, we critically assess the interplay between startups and city administrations for city-driven innovative public procurement or “challenge-based procurement” policy, taking Amsterdam’s Startup in Residence (SiR) programme as a case study. We describe and analyse this programme from two perspectives: i) the economic development perspective, i.e. does it promote startups and does it bring them new business opportunities, and ii) a governance perspective, i.e. does it bridge the gap between startups and the city bureaucracy; does it lead to a more innovative culture within city government.