Venture Capital (VC) is the important financial intermediary that supports the
growth of entrepreneur business. They are interested to invest in these newly-developed
firms due to potentially attractive returns of investment. Nevertheless, the targeted firms
usually expose to large amount of risks which are able to deviate the performance of
investment rather than anticipated results. This research deploys the recent-developed
Economic Policy Uncertainty (EPU) index to examine its effect on the performance of
VC investment in U.S. market. We adopt the internal rate of return from Cambridge
Association to be the indicator of VC performance with additional validation to confirm
the consistency of analysis. We discover the significant inverse relationship between
the EPU index and the VC performance. Furthermore, we examine the stage of VC
investment that is dominantly influent by the EPU and find that the performance of
early-stage VC investment is the more sensitive to the movement of EPU than multistage
and later-stage of VC investment. Moreover, it is also found that the effect of EPU
on the performance of VC is more negatively intensive during the dotcom booming
period. Our findings give benefits to both VC limited partner and general partner to
deploy the EPU index as the indicator of the VC performance. The limited partnerships
can aware the sensitivity of their portfolio in each stage of VC investment that can be
influent by the EPU. Furthermore, the limited partnerships should be more concern
about the VC performance during the booming period due to more negative effect from
the fluctuation of EPU than normal period.

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