Abstract Our study contributes to venture capitalist (VC) literature by examining how VCs’ failure tolerance influences the innovation journey of young firms; as we show that firms invested in by VCs who process moderate levels of tolerance for failure obtain more patents. Drawing on entrepreneurial orientation (EO) and abnormal institutional investor attention (AIA) theories, we further highlight the attention dimension of interorganizational relationships among young firms and institutional investors. Our results reveal an inverted U-shaped relationship between EO and patent search, such that young firms that have moderate levels of EO are more likely to search more patents than are firms with high/low levels of EO. Patents are positively (negatively) associated with new product launching (revenue growth). Our piecewise regression further reveals that EO is positively (negatively) associated with new product launches among below (above) median EO firms. When firms launch new products, the higher the EO, the higher the abnormal stock returns in short windows (-1, +1); AIA weakens the strength of such relationships, indicating the substitution effects of EO and AIA. In the longer term, one-month buy-and-hold portfolio of new products generates 27.77% annualized excess returns (2002–2019). We provide managerial implications to young firms and hedge funds. Keywords: Entrepreneurial orientation, venture capitalists’ tolerance for failure, abnormal institutional investor attention, patent, new product launching, event study, post-IPO young firms Declaration of interests: None.