Introducing venture capital with an international background is a major policy aimed at nurturing startups by leveraging international capital, technology, and management expertise. This paper examines whether international venture capital can provide value-added services to enhance the innovation of startups by constructing a two-sided matching structural model and using data from Zero2IPO. Our findings reveal that startups backed by international venture capital exhibit higher pre-investment innovation potential compared to those backed by local venture capital, but their post-investment innovation performance is inferior. Mechanism analyses indicate that international venture capital with more experience investing in similar startups do not exert a more negative impact on innovation, ruling out the possibility of innovation expropriation. Furthermore, international venture capital fails to improve the post-investment innovation performance of startups through conventional investment strategies such as staged financing and syndication, suggesting that it fails to provide value-adding services due to the lack of efficient measures to overcome liabilities of foreignness. Following the market-oriented reform of the stock issuance regulation in 2013, the negative impact of international venture capital on startup innovation has been mitigated. These findings provide an empirical basis for transitioning China’s venture capital market opening-up from a factor-flow-oriented approach to an institution-oriented one.