(FORTUNE Magazine) – If it worked for Silicon Valley, it can work for Eastern Europe -- or so the theory goes. The U.S. government is investing taxpayer dollars in venture capital funds -- the same financial vehicles that sluiced private money into dozens of start-up computer companies in the 1970s and 1980s -- to stimulate the development of capitalism in Poland and Hungary. Says Robert Faris, president of the Polish-American Enterprise Fund and former president of the Alan Patricof Associates venture capital firm of New York City: ''The fund stacks up favorably with any other global investment opportunity -- if you're not averse to risk.'' The Polish Fund has $240 million set aside by Congress to invest over the next three years; the Hungarian-American Enterprise Fund, $60 million. Its head: Alexander Tomlinson, a veteran of Morgan Stanley and First Boston. Applications have flooded into the funds' New York City offices, mainly from would-be entrepreneurs. Other requests for capital came from FORTUNE 500 companies with operations in Poland. None have yet received approval. Both funds expect to make profits and to reinvest them in the countries' economies.