This study provides an assessment of the factors that make Venture Capital (VC) a form of financial intermediation able to contribute to fostering innovation and economic growth, with particular reference to Asia and the Pacific. It reviews the economics of VC, focusing more on the aspects that are relevant for policy. It also discusses what conditions are conducive to innovation and growth, and examines recent evidence on public policy for venture capital. The paper concludes by examining some descriptive evidence on the state of VC markets in the Asia and Pacific, and compares them to those of North America and Europe.