Supposedly they used a lottery until James I stopped it which forced The Virginia Company into receivership. This allowed him to take over the colony and make it a royal colony in 1624.
The lottery was conducted in London, under the approval of James I. Prizes of up to 5,000 pounds could be awarded^[1].
The actual drawing utilized a pair of containers which were placed adjacent to one another. One contained the numbered tickets, and the other contained the "prize tickets". For each numbered ticket drawn, a prize ticket was drawn. In the event of a match, a winner was declared.
In order to sell tickets, the lottery was advertised throughout London and the surrounding towns. One tactic was to emphasize the "noble cause" of settling the new colony, and spreading Christianity to the new world. Initially, the Virginia Company endeavored to popularize the lottery with the upper class, but did not experience sufficient ticket sales. Inevitably, they were forced to offer the lottery to the common folk, which did not please the wealthy citizens, but did increase ticket sales.
By the time the lottery fell out of favor with James I in 1621, the Virginia Company had raised approximately 29,000 pounds in revenue.
Source: Neal Millikan. Lotteries in Colonial America