Abstract: We investigate the relationship between the financial choices and the extent of vertical flexibility of a firm. By vertical flexibility we mean simply the opportunity to outsource a necessary input and to reverse the choice as input market conditions dictate. We consider a firm that has to select the shares of equity and debt and its vertical setting, i.e., whether and how much to outsource the production of a necessary input and how to finance all that. Debt is provided by a lender that requires the payment of a fixed coupon over time and, as a collateral, an option to buy out the firm in certain circumstances. Debt leads to the same level of flexibility acquired by an unlevered firm but to invest earlier in the flexible technology. An alternative to debt is the involvement of venture capital for the production of the input. We explore this second avenue finding that the extent of outsourcing adopted is lower than for the unlevered firm, but the firm invests earlier in the flexible technology.