Innovation is one of the primary approaches by which companies address the progressively severe social, environmental, and market pressures that they face, and it is a crucial route for companies to maintain sustainable development. Venture capital (VC) plays a significant role in promoting enterprise innovation, especially breakthrough innovation. Venture capital can increase executive compensation and corporate innovation. Previous studies have also indicated that compensation incentives can be beneficial to corporate innovation. Although the relationships between two of these three variables have been validated, the relationship between VC, executive compensation, and corporate innovation has not yet received ample consideration. Our research focuses on the connections among these three variables, and we chose corporate for our sample, which listed corporations on the Shenzhen and Shanghai stock exchanges in the period from 2009 to 2017. We found that VC has a mediating effect on innovation through executive compensation incentives, although not necessarily a full mediation effect—merely a partial one. Moreover, we found that VC primarily plays the role of a compensation incentive by amplifying the internal salary gap of corporate. By employing invention patents to replace explanatory variables, using a Heckman two-stage method, and utilizing propensity score matching (PSM) for robustness testing, the validity of the conclusion was confirmed. In addition, we discovered that experienced VC or companies with lower governance quality are more likely to use compensation incentives to promote corporate innovation. This study provides valuable insight for VC in cultivating corporate innovation, as well as for corporates looking to boost their innovation.