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(Fortune Small Business) -- If our Best Places rankings were based on availability of muses, New York City, with its cultural diversity and dynamic arts scene, would probably take first place. Other highlights include its status as the world's financial services capital and its steady influx of ambitious, educated workers.

But Manhattan and its surrounding boroughs are home to the nation's most expensive real estate -- residential rents rose by more than 5% over the past six months. At roughly 16%, the combined state and local tax on corporate profits is one of the highest in the country. And the cost of living comes in at more than 50% higher than the national average, according to the Bureau of Labor Statistics.

The good news: Public agencies and private firms are launching a growing number of new initiatives to help New York City's 200,000-plus small companies cope with the many barriers to entry.

Take NYC Seed, a venture capital fund that injects small amounts of series-A funding -- up to $200,000 a pop -- into promising technology and software companies. The firm, a five-way partnership that includes the Polytechnic Institute of New York University and the New York State Foundation for Science, Technology and Innovation, also leverages its tech-based network to provide young companies with mentoring, potential customer contacts and a service that matches them up with engineers.

"The needs of small companies are so great - we're very helpful in terms of making introductions and helping them think strategically," says Owen Davis, NYC Seed's managing director.

NYC Seed, which looks for firms with two dedicated founders and a working prototype, has invested in four software startups so far. These include Path 101, a sophisticated job-search site, and PlaceVine, a Web-based service that makes it easier for marketers to find product-placement opportunities online, in film and on TV. NYC Seed hopes to close 10 to 15 more deals in total before exhausting its $2 million fund.

New York City is also a great foodie destination, boasting some of the world's finest restaurants and a major gourmet-foods trade show. To keep the city's gastronomic market rolling, the city's Economic Development Corporation announced plans this summer to open a kitchen incubator, allowing budding food manufacturers to rent a 4,000-square-foot shared culinary work space in Harlem. Although the initiative won't launch until sometime next year, food startups can take advantage of the four incubators that already exist.

Kathrine Gregory, the founder of Mi Kitchen es su Kitchen, estimates that clients who use her service save a big chunk of the $100,000 in licensing fees and rent that it takes to start a food manufacturing company.

"The mission of the incubator is not to have folks stay with us forever," says Gregory, who fields about six calls a day from prospects. "We offer a nurturing, supportive environment in the hopes that soon they will outgrow our facility."