Harry Stebbings@HarryStebbings2d ago

The single biggest mistake VCs make is they do not build relationships with LPs in between funds. You need to know how the best allocators to venture in the world think: - What they like? - What they do not like? - What would make them pull from a fund? - What would make them double down in a fund? - How a fund can build urgency to get them over the line? And so so much more. The challenge is not many CIOs speak openly about this. And an even bigger challenge is many are not independent thinkers and tend to follow what others around them do. David Morehead is one of the most independent-thinking CIOs in the endowment fund world. He has scaled Baylor to $2.6BN and one of the most respected institutions. I sat down with @CIO_Baylor to understand what every VC needs to hear from LPs but does not. I summarised my notes below: 1. Even the Best Venture Returns Don’t Matter to Some Funds For mega-endowments managing $40 billion to $60 billion, writing $20 million checks into elite venture funds may simply not move the needle. Even an extraordinary 50x return that generates $1 billion has limited impact on the overall portfolio, pushing mega-LPs toward much larger platform allocations. 2. How This Endowment Made Millions Betting That Vibe Coding Would Not Replace Core Software When software stocks fell 50% to 60% on fears that AI “vibe coding” would make SaaS obsolete, Baylor looked at how enterprises actually operate. Traditional businesses are unlikely to replace mission-critical systems requiring 100% precision with AI that is only 93% accurate, turning the sell-off into a major buying opportunity. 3. How We Think About Position Sizing A $400,000 distribution from a 7x exit means little to a multi-billion-dollar endowment. Rather than focusing solely on fund size, Baylor works backward from underlying company exposure, targeting roughly $3M per portfolio company so major wins can generate a meaningful dollar impact. 4. Why Is Velocity of Capital More Important Than Multiple of Capital? A 15-18-year venture fund generating 15x can produce less compounded capital than 3 consecutive 6-year growth funds returning 3x each, compounding to 27x. Endowments need capital returned and redeployed quickly enough to maximize long-term compounding. 5. Why Talking About Returns Without a Timeline Attached Means Nothing A 5x return means nothing without knowing the timeframe. A 5x over 30 years is terrible, while a 5x over five months is extraordinary. Endowments therefore evaluate returns alongside duration, because the velocity of capital can matter just as much as the headline multiple. 6. Why We Learn Way More From Our Public Managers Than Our Private Managers Private venture managers can get caught up in speculative technology narratives, like predicting self-driving cars on every road within three years. Public-market managers often provide more grounded perspectives because their frameworks must account for immediate regulatory hurdles, adoption friction, and continuous price discovery. 7. You Have a Blank Canvas. What Do You Do Next? When constructing a multi-asset portfolio from scratch, institutional allocators should establish their private-market allocation first. Because illiquid investments constrain liquidity and future reallocation, allocators need to define strict risk boundaries and box off the private portfolio before deploying capital across public markets. (links in comments)