20VC: How LPs Allocate to Venture in 2026: What They Want, What They Do Not Want | Why Fund Multiple Does Not Matter Without a Timeline | Why Velocity of Cashback is the Most Important Thing with David Morehead, CIO @ Baylor

David Morehead (0:00)

The single reason that privates exist is to make money. Period, end of story. I'm a little perplexed by the length of some of these funds. It's not clear to me that the GP incentives are aligned with the math that runs endowments. What we're really after is the velocity of capital, not just returns on capital. There's a rule in our office that you're not allowed to talk about returns without also talking about time. We happen to have about 2.5% of the endowment in Anthropic. I never want to be all in. Things can always get worse. You are seeing the pushback on AI at the data center level.

Harry Stebbings (0:44)

This is 20VC with me, Harry Stebbings. Now, I'm a venture investor for a living. And something that's frustrated me for a long time is that we don't get to hear from the greatest CIOs, Chief Investment Officers, who invest in the venture funds that we run. We don't know how they think, what they like to invest in, what worries them when they're invested in a manager and they see them doing, how they think about the market today and allocating to managers. Today, I sit down with one of the best in that business, David Morehead. He's the CIO of Baylor University Office of Investments, and he's one of the most respected CIOs in the business. Baylor's endowment is around $2.6 billion.

David is quite outspoken, which makes this conversation one of the most refreshing, but also articulate and clear for managers thinking about raising, looking to raise, and for managers now wondering how they should operate with their LP base. David was incredible, and I'm really proud of this show because it shines a light on a part of the industry that I feel needs a lot more transparency. But before we dive into the show today, founders face a different set of challenges at every stage of growth. For Sid Shait, co-founder and CEO of D-Matrix, JP Morgan delivered the guidance and expertise to help navigate what came next. He credits JP Morgan's high touch approach with supporting D-Matrix as it grew and expanded internationally. Whether you're in the early days or expanding into new markets, JP Morgan helps startups navigate complexity with real confidence, offering personalized guidance and deep sector expertise. Find out how JP Morgan helps founders at jpmorgan.com/growwithoutlimits.

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Visit flex.one, that's F-L-E-X dot O-N-E, and use the code 20VC. You have now arrived at your destination. David, I am so excited for this. I have done so much talking over the last 24 hours. It's untrue. So thank you so much for joining me today. This will be a lot of fun.

David Morehead (4:19)

Sure, happy to be here.

Harry Stebbings (4:20)

Now, I would love to just start with a little bit of like an overview of Baylor and how you think about investing today from Baylor as an institution.

David Morehead (4:30)

Right, it's a pretty important job, right, particularly in the place that we are with higher ed. You know, we obviously have fewer high school students in the US coming out of the great financial crisis. And so as a number of high school students decline, that's obviously fewer tuition dollars. The other thing that we have going on, obviously, is that the last couple of years has been more difficult for international students to come over to the states, appropriate visas, stay, etc., all of those things. Those are full pay students, obviously. And so that kind of compresses higher ed, you know, financial books a different way. And so what that means is that collectively there's a lot, a lot of competition for domestic students these days. And if you just look at the last, like this incoming class, I guess it would be the class of 2030, there are a lot of schools across the country that did not meet their targets for, you know, incoming student class. And what that means, of course, is that the revenue has to come from somewhere else. And so in this time and space, I think realistically for the next 10 or 15 years, the distributions that are coming off of endowment funds are going to be increasingly important. And so we manage sort of like with that in mind. Now, we've always been good at the downside. Historically, our office, like first quarter of 2026, I think the SMP was down 4%, we were flat. If you go back over time and you look at the fourth quarter of 2018, the first quarter of 2016, 2012, if you look at a lot of these different times, our office in general tends to outperform to the downside. And what we've kind of gone back and looked at is, how could we get better at the upside? We started this about five years ago, kind of knowing that this high school student issue was going to be a problem. And so we've reorganized things over the last five years to make sure that we're doing better to the, on the right side of the distribution.