Answer extracted from the How I Invest with David Weisburd podcast — listen to the full episode below.
Why do most institutional LPs struggle to participate in co-investment opportunities?
Institutional LPs face a structural speed barrier: co-investment decisions typically require action within less than five days, but most institutional investors only convene their investment committees once or twice monthly—making timely participation impossible. While 99% of LPs express interest in co-investing, only 2–10% actually execute co-investments on a regular basis.
The disconnect between stated desire and actual participation reveals a governance problem, not a preference problem. As V explains in the episode, institutional LPs operate within decision-making cycles designed for traditional fund commitments—a model built for deliberation, not rapid deployment.
The Meeting Cadence Constraint
Co-investment opportunities move at venture speed. A founder or lead investor circulates a deal, typically offering a window of 3–5 days for commitment decisions. This timeline aligns with operational urgency: the company needs certainty to finalize its round, and delay signals hesitation to the team.
Most institutional LPs—pension funds, endowments, insurance companies, family offices operating through traditional governance structures—schedule investment committee meetings monthly at best. That cadence made sense for fund selections, where deal evaluation unfolds over weeks. It creates a fundamental misalignment with co-investment workflows, which demand decisions measured in hours or days.
An LP attending a committee meeting on the third Tuesday of each month cannot act on an opportunity that closes the next day. Exception protocols exist in some organizations, but they typically require supermajority approval or the CFO's personal intervention—processes that add friction and discourage regular participation.
The Capital Commitment Hurdle
Speed alone does not explain the participation gap. Co-investments also require committing meaningful capital amounts—often $5 million to $25 million per deal—on a deal-by-deal basis, rather than making one annual capital commitment to a fund vehicle.
This fragmented deployment model conflicts with how institutional LPs budget and reserve capital. They typically forecast annual commitments, allocate funds through annual cycles, and expect predictability. Co-investing demands the opposite: flexibility to deploy opportunistically, absorb dry powder into reserves, and redeploy based on deal flow timing. Discussed further in the full podcast, this operational mismatch explains why institutions express enthusiasm but rarely convert it into action.
"The question is less whether AI can disrupt labor. The question is what kinds of labor get disrupted first."
V — Founder of a new venture fund (post-Lightspeed). Dr. V spent nearly a decade as a partner at Lightspeed Venture Partners, one of Silicon Valley's most active venture investors, before spinning out to launch his own fund. Throughout over a decade of venture capital investment, he has maintained a disciplined focus, making zero personal investments outside of his institutional vehicles, on the belief that delivering consistent returns across multiple investment platforms simultaneously is neither realistic nor prudent.
See also
Which new participant categories are expanding their presence in private markets?
Family offices are becoming more switched on to alternative assets and making direct investments in companies. Sovereign wealth funds, which manage approximately $15 trillion in global capital, are allocating roughly one-third of their total capital to private markets, with approximately two-thirds of their private market allocation directed toward direct investments rather than fund-based vehicles.
What is the primary function of a venture capital firm's capital markets team?
The capital markets team segments a venture fund's portfolio of companies into buy, hold, or sell categories. For a large firm with 30–50 investors and hundreds of companies in its portfolio, this function helps manage exits and capital allocation across the entire investment portfolio.
How has the venture capital playbook fundamentally changed over the past decade?
Ten years ago, venture was a reputation business where investors built decades-long track records. Today, sourcing especially at early stage is a media and founder relations game, with speed and brand presence increasingly determining deal flow and investment access.