The fund, called Flatiron Partners, has support from Chase's venture unit, Chase Capital Partners, and Softbank, according to the New York Times, which cited an executive close to the deal.
Flatiron Partners will focus its investments on new companies primarily in New York but will also look into companies on the East Coast in general.
The establishment of the Silicon Alley fund follows an announcement last week of a $100 million venture capital fund to back software developers building Java applications. Large venture capitalist investments in software and Internet start-ups reveal Wall Street's increasingly strong committment to the development of the high-tech sector.
The fund has already invested $4 million in Yoyodyne Entertainment, a company that is developing sweepstakes and promotional games on the Web.
Flatiron is the second venture capital fund that has been formed this summer in New York City. The company will be managed by Jerry Colonna, a former partner in the CMG Ventures Fund, which financed search engine company Lycos before it went public this year, and Fred Wilson, a former partner in Euclid Partners.
Chase and Softbank officials were not available for comment.
Pockets run deep for Java