University spin-offs are often treated as key to establishing new high-tech ventures. The importance of relationships for such ventures has been extensively emphasised, particularly concerning innovation co-creation commercialisation. But do such establishments really produce value to the spin-off and foster its further development of innovations? This paper argues that distance in relationship is important for the continuous innovativeness of the spin-off, and discusses how such distance impacts the innovation capabilities and co-creation of a university spin-off. The paper presents a longitudinal case study of a Swedish university high-tech spin-off. It points to how horizontal proximity in the supply chain facilitates the development of the core technology but that relationship distance, in the form of geographic and vertical supply-chain distance, positively impacts the innovation capabilities of the spin-off. Supply-chain distance results in knowledge distance (or fit) which facilitates this freedom, yet moderates the co-creative capability between various parties.