How government subsidies influence venture capitalists and entrepreneurial teams were studied when there is optimal financial contract between them.  It is concluded that there is wealth transmission effect between venture capitalists and entrepreneurial teams, namely, that Government provides public subsidies to venture Capitalists can increase entrepreneur's expect earnings.  This kind of subsidies policy can encourage more technologists and managers enter into enterprise. Some low valued projects which can not obtain venture Capitals can also gain some venture Capitals.  Public subsidies can not only raise the supply of venture Capitals but also extend their demand.