From a policy perspective, university spin-offs (USOs) with venture capital (VC) investment are most promising because they are growth-oriented and contribute most prominently to economic growth. Hence, effective policies should consider the motivation of VC investment in USOs. By employing a manually collected novel database that includes all listed high-tech USOs and related VC investment activities prior to initial public offering (IPO) in China over the past three decades, we observe a close relationship between a multi-layered second-tier stock market and a vibrant VC market for USO financing. We find that USOs receive less investment from government VCs and mixed-VC syndicates and receive their investment in an earlier stage than non-USOs but that private VCs have no funding bias against USOs. The result implies the presence of crowding-in effect of government VCs in the context of USO financing. Moreover, VC investment in USOs is more pronounced in deals that have a higher initial equity commitment of academic founders and a noncontrolling strategy, highlighting the importance of delivering “value”, “commitment”, and “trust” signals in winning VC funding. Finally, as private VCs in the form of limited partnerships behave like typical pre-IPO-stage investors, they barely demonstrate any significant preference over these factors.