This paper presents a new dynamic general equilibrium model of innovation with heterogeneous firms that incorporates an explicit venture capital (VC) market. The data show that VC financing accounts for a disproportionate share of sales and employment in the US compared with its limited share of total investment. VC firms invest heavily in young and innovative firms, bringing operational knowledge, together with financing, to their portfolio companies. The goal of this paper is twofold. First, I measure the par-ticular channels through which VC firms influence their undertakings, using a structural model. Second, I explore the implications of VC investments for aggregate productivity and innovation policy. To address these goals, I combine and structurally estimate an endogenous technical change model with a VC setting that includes (i) the new feature of expertise, and (ii) the endogenous matching market where firms and VCs meet. In this model, firms improve the quality of their innovative product through risky R&D. VC expertise raises the efficiency of product development, and firms obtain VC financing at the cost of selling an endogenously determined share of the company. The entry cost that VC companies face also introduces a selection margin: VCs invest in firms that present a high potential for growth. The estimated model captures certain features of the VC matches and innovation observed in the US data. Counterfactual ex-periments imply that operational knowledge accounts for about 1/3 of VCs’ impact on aggregate growth. Policy experiments suggest that changes affecting the VC market could result in a 7 basis point gain in the long-run growth rate of the economy.