This study investigates how economic policy uncertainty (EPU) affects venture capital (VC) contract terms. Using a unique database of contracts between VCs and entrepreneurial firms in China, we provide evidence that EPU positively affects the presence of investor-friendly covenants in VC contracts. Our mechanism analysis shows that screening for high-quality startups and VCs’ increased bargaining power are potential channels. Furthermore, we find that including more investor-friendly covenants mitigates the negative effect of EPU on VC exit performance.