Venture investment has great impact on the innovation and must be interfered in by the government through some public policies. The relation among public policies, venture investment and innovation were analyzed. On the basis of the demand and supply of innovation, a model was built to study the innovative product and venture investment markets. The equilibrium of the whole market was analyzed with the help of equilibrium method. According to maximum social utility, the optimal combination of public policies and its influences on social welfare were studied to direct venture investment.