This study uses venture-capital-backed enterprises listed on the National Equities Exchange and Quotations from 2013 to 2021 as a sample to investigate how signing valuation adjustment mechanism agreements influences startup innovation. The result show that entering into these agreements leads to a significant reduction in firms’ innovation output. Mechanism analysis reveals that after signing the agreements, firms prioritize value realization over value creation in their decision making, as evidenced by a decrease in the R&D investment and the proportion of R&D personnel, accompanied by an increase in the proportion of selling expenses and sales staff. Heterogeneity tests show the innovation decline is more pronounced for firms with weak corporate governance and high operating environmental uncertainty after signing the agreements. Extended analysis further finds that venture capitalists exert an “information effect” by appointing directors to the board, which raises their tolerance for failure, generating a positive impact on corporate innovation.