Venture capital financing typically features complex securities and staging. We develop a dynamic contracting model where an entrepreneur seeks financing from active investors (who provide costly monitoring and screening) and passive investors (who offer cheaper capital). Under multilateral moral hazard, we show that the optimal contract can be implemented through a sequential offering of securities, including common and preferred equity, options, warrants, as well as a combination of senior debt and credit lines (venture debt). Our model predicts when entrepreneurs optimally separate monitoring and screening across multiple active investors (“rounds financing”) versus consolidating these functions with a single active investor (“milestone financing”). Rounds financing dominates when informed capital is scarce.

We document new empirical facts and develop a theory of private equity continuation vehicles (CVs), in which general partners (GPs) transfer portfolio companies from an existing fund to a new vehicle they continue to manage. CVs can improve efficiency by extending the holding period of high-potential firms, but they also allow GPs to extract rents by exploiting their informational advantage and intermediary position between legacy and new limited partners (LPs). CV formation may involve two informational frictions: adverse selection, where new LPs overpay for low-quality assets, and inverse selection, where they underpay for high-quality assets. These frictions intensify when fewer legacy LPs roll over their stakes.

The GP’s coinvestment and carry, and whether the legacy fund is in or out of the money, determine whether CVs arise and how they perform. The model links LP liquidity needs, GP coinvestment, and contract design to CV performance and distribution of value across investors.

We present a model of biased promotions: workers differ only by a nonproductive label, "Blue" or "Red," and firms favor Blue workers in promotion decisions. In equilibrium, worker self-sorting implies (partial) segregation and endogenous firm heterogeneity. Large, high-wage firms offer risky career paths, attracting workers from both groups, whereas small, low-wage firms offer stable careers that attract only Red workers. Promotion biases can benefit firms by weakening workers' outside options and increasing industry profits.

The model generates persistent group differences in promotions, earnings, and career trajectories as an equilibrium outcome of competitive labor markets.