This study investigates whether venture capital reputation is a blessing or a curse for entrepreneurial firm innovation by using data from 1553 observations of venture capital investments on entrepreneurial firms in China’s New Over-the-Counter (OTC) Market. Advantages that venture capital brings to entrepreneurial firms have been widely acknowledged in extant research. However, our research emphasizes the potential resource outflows rather than inflows when firms are embedded in a shared reputable venture capital, and finds that the curse effect of venture capital reputation on entrepreneurial firms is manifested. Furthermore, we develop the concept of venture capital “intra-industrial reputation” and “extra-industrial reputation” to give a contingent answer to the “blessing or curse” question. The conclusions are drawn indicating that the curse effect is contingent on industrial distance. Venture capital intra-industrial reputation is positively linked to entrepreneurial firm innovation, whereas extra-industrial reputation exerts a strong negative impact, which is responsible for the curse effect.