This paper studies entrepreneurs' choice of investors, who must provide financial capital and effort for projects with externalities. Investors compete to finance the projects by offering monetary investment in return for share in the project. Investors' non-monetary contribution to the project (effort) can potentially increase the project's value, but non-observability of the effort creates a moral hazard problem. We study two mechanisms to alleviate this problem. Portfolio investment contracts allow investors to commit to providing higher effort thanks to the externalities between the projects. Alternative mechanism gives entrepreneurs higher personal compensation in return for the higher stake in the project thus giving investors zero profits in equilibrium. Surprisingly, externalities do not give "portfolio" contracts as much of an advantage as one would expect. Quite often they are dominated by "high-compensation" contracts even when this means that some projects will not receive an optimal amount of effort. This means that even with stage financing, entrepreneurs initially receive cash allocations higher than necessary for the success of this stage. The second surprising result is that investors who fund portfolio of projects always make strictly positive profits despite the competition.