Government guidance fund, also known as venture guidance fund, refers to the special funds invested by the government to attract relevant local governments, finance, investment institutions and social capital, invest in venture capital institutions or newly established venture capital funds in the form of equity or creditor's rights, and support the development of venture enterprises for the purpose of non-profit.

The government guidance fund supports the entrepreneurship and technological innovation of small and medium-sized science and technology enterprises in the initial stage by guiding the venture capital behavior. The purpose of government-guided funds is to exert the leverage amplification effect of financial funds, increase the supply of venture capital, and overcome the market failure problem of allocating venture capital only through the market. In particular, by encouraging venture capital enterprises to invest in early enterprises such as seed stage and start-up stage, we can make up for the shortage of ordinary venture capital enterprises mainly investing in enterprises in growth stage, maturity stage and reconstruction stage. The operating principles of guiding funds are government guidance, market operation, scientific decision-making and risk prevention.

The role of government guidance funds in venture capital has the following four points:

1. Guide funds to participate in venture capital institutions, support the establishment of new venture capital institutions according to pre-agreed conditions and deadlines, and expand the total investment in small and medium-sized science and technology enterprises.

2. Support the follow-up investment. Guide funds and venture capital institutions to invest in small and medium-sized enterprises in the initial stage, support established venture capital institutions, and reduce their investment risks.

3. Risk subsidy. Give some subsidies to venture capital institutions that have invested in high-tech small and medium-sized enterprises in the initial stage, and enhance their ability to resist risks.

4. Investment guarantee. Venture capital guidance fund provides early financial assistance for small and medium-sized enterprises with investment value but certain risks. Guide the fund to give secondary subsidies on the basis of equity investment in these enterprises, so as to solve the problem that venture capital institutions are afraid to invest and want to invest because they are worried about risks. It is especially suitable for small and medium-sized enterprise service institutions such as science and technology business incubators.