Aug 4, 2025 · 1h 30m · 20vc
Miles Dieffenbach: Inside Carnegie Mellon’s $4BN Endowment & The Math Behind DPI, TVPI, Illiquidity · 20VC with Harry Stebbings
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In this 20VC episode, host Harry Stebbings interviews Miles Dieffenbach, Managing Director of Investments at Carnegie Mellon University, to dissect the complex mechanics of institutional endowment allocation. Dieffenbach provides a candid critique of the venture capital industry's current liquidity crisis, the broken math of multi-billion dollar growth funds, and the rigorous governance processes CMU employs to ensure disciplined risk management.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 23.5% of the talking time here. How this is scored →
Harry as informed peer 5.0 Guest teaching 6.0 Guest disagreement 1.6 Harry pushing back 2.4
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 1:14:11 Miles argues OpenAI could go to zero
Miles forcefully rejects the assumption that OpenAI and Anthropic are guaranteed winners, warning that burning $5B-$10B annually without self-funding creates fatal risk if capital markets freeze.
Hardest push from Harry ▶ 11:56 Harry attacks $50M-$100M seed fund mathHarry aggressively interrupts and challenges the viability of mid-sized seed funds, running through check size and ownership math to argue they leave managers with subscale positions.
Biggest teaching moment ▶ 36:43 Miles breaks down the $800B exit requirement mathMiles delivers a detailed dollar-weighted math breakdown proving that a $7B multi-stage fund requires $800B in exit market cap to deliver a 4x net return to LPs.
Harry holds his own ▶ 11:56 Harry demonstrates seed check size mechanicsHarry showcases deep industry domain knowledge by demonstrating how average seed round dynamics destroy the portfolio economics of $50M-$100M funds.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| The Interview Begins and Overcoming Cancer | 2 | 3 | 0 | 0 | Harry begins with an empathetic conversation regarding Miles surviving lymphoma at age 26. The dynamic is collaborative and personal, with no pushback or conflict. | |
| Carnegie Mellon's Endowment and Portfolio Construction | 3 | 5 | 0 | 0 | Miles breaks down CMU's $4B endowment architecture, detailing the 85/15 equity/fixed income split and 50% private allocation. Harry asks clean structural questions. | |
| Venture Return Reality and LP Decile Access | 4 | 6 | 2 | 3 | Miles bluntly states LPs are not compensated for venture risk, backing his claim with historical IRR and DPI benchmark data. Harry raises a mild counterpoint about lagging historical data. | |
| The Fallacy of Seed Funds and Selection | 7 | 5 | 3 | 6 | Harry forcefully challenges the math of $50M-$100M seed funds, calculating average round sizes and check requirements. Miles responds by defending non-consensus deal pricing. | |
| The Pillars of Venture and Portfolio Management | 5 | 6 | 1 | 2 | Miles walks through the five pillars of venture and explains why LPs prefer cash distributions over stock. Harry probes GP markup accuracy and hubris. | |
| Proprietary Sourcing, Picking, and GP Diligence | 5 | 5 | 1 | 2 | Miles discusses deal sourcing and the necessity of conducting 20 reference calls, including off-reference checks. Harry offers relevant industry anecdotes regarding fund humility. | |
| Partnership Dynamics and the US Marriage Analogy | 4 | 5 | 2 | 1 | Miles analyzes why VC partnerships break down due to incentives and work ethic discrepancies, comparing GP commitments to 25-year marriages. | |
| LP Churn, Fund Concentration, and Taxes | 5 | 6 | 1 | 2 | Miles breaks down the mathematical headwinds for US endowments, explaining how a 5% annual draw plus 3% higher-ed inflation forces an 8% return target. | |
| Fundraising Timelines and Management Stake Risks | 6 | 8 | 3 | 5 | Miles delivers a masterclass on multi-stage fund scaling, proving mathematically that a $7B vehicle requires $800B in exit market cap to return 4x net. Harry counters that macro outcome sizes are expanding. | |
| Index Ventures and Fund Size Discipline | 5 | 6 | 2 | 3 | Miles praises Index Ventures for maintaining fund size discipline post-2021. Harry pushes on whether $1B-$2B funds represent an awkward middle ground. | |
| The Math of Venture Returns: Figma and Wiz Outcomes | 6 | 7 | 2 | 3 | Miles illustrates return dilution by showing how owning 10% of a $20B Figma outcome generates only 0.2x net return for a $7B fund. The conversation addresses fee stacking incentives. | |
| Active Management Debates and the Persistence of High Fees | 6 | 6 | 2 | 4 | Harry challenges the idea of active management, arguing LPs prefer passive managers over GPs who push bad operational choices. Miles argues mega growth funds charging 2&20 are essentially passive public equity managers. | |
| LP Decision Making: Performance-Driven Discipline vs. Brand Loyalty | 4 | 5 | 1 | 2 | Miles criticizes LPs who allocate based on brand names to avoid career risk rather than targeting superior risk-adjusted returns. | |
| The Acceptance of High GP Fees and Market Dynamics | 5 | 5 | 1 | 2 | Miles examines fund deployment cycles and praises Mark Suster for selling portfolio positions in 2021 to secure real DPI for LPs. | |
| The Liquidity Drought and SaaS Valuation Realities | 6 | 7 | 2 | 2 | Miles contextualizes the current liquidity drought, pointing out that 2022-2024 saw fewer public IPO dollars than post-dot-com crash 2002-2004. He contrasts slow SaaS growth with public Microsoft. | |
| Direct Portfolio Monitoring and Underwriting Extreme Outcomes | 5 | 8 | 1 | 2 | Miles shares an incredible story about a 13-year-old fund holding Circle at a 30% discount before its valuation exploded. He analyzes the risks of secondary portfolio sales like Yale's. | |
| Liquidity Hurdles and the Vital Call for IPOs | 5 | 6 | 2 | 2 | Miles urges venture capitalists to take companies public, explaining how private capital was unnaturally cheaper than public capital for years but public markets now reward quality tech. | |
| CMU's Agnostic Approach to Thematic and Sector-Focused Funds | 5 | 6 | 1 | 2 | Miles explains CMU's sector-agnostic approach and discusses structural USD/RMB fund misalignment in China caused by US sanctions. | |
| Big Tech M&A: Cash-Rich Buyers and Regulatory Friction | 5 | 7 | 1 | 2 | Miles breaks down Big Tech's immense cash reserves and explains why regulatory friction forces them into acqui-hires and licensing deals rather than traditional M&A. | |
| OpenAI's High Burn Rate and the Inevitable AI Bubble | 6 | 7 | 3 | 3 | Miles presents a strong bear thesis on OpenAI, pointing out its $5B-$10B annual burn rate and stating it could go to zero if an AI bubble pops and capital markets freeze. | |
| The Cyclical Risks of NVIDIA's Peak Valuation | 5 | 7 | 3 | 3 | Miles highlights NVIDIA's underlying hardware cyclicality, citing investor Chris Hohn to warn of a potential 70% drawdown during a cyclical demand dip. | |
| Constructive Criticism and the Overranking of 'Founder Friendliness' | 5 | 6 | 1 | 1 | Miles draws on his college football background to argue that hard coaching beats superficial 'founder friendliness', emphasizing that constructive criticism drives trajectory changes. | |
| Quick-Fire Round: Industry Truths, Red Flags, and GP Behaviors | 6 | 6 | 2 | 3 | In a rapid-fire session, Miles exposes common GP fundraising lies, discusses GP commit importance, and tells a funny story about playing late-night ping pong with Lee Jacobs to win an allocation. |
Statements from this episode (76)
Only Top-Decile VC Managers Consistently Beat Public Markets
“Because at that point, top decile, you are achieving returns above the PME consistently. But below that, even top quartile, you're not.”
Carnegie Mellon Allocates 85% of Its $4B Endowment to Equity
“We manage four billion on behalf of the university. And so starting at the highest level, we think of equity and fixed income as kind of the two parts of the endowment. 85% of the endowment is equity. 15% is fixed income. That is our allocation. And we manage …”
CMU's Private Investments Were Self-Funding for Three Years
“From a liquidity perspective, we've been fortunate compared to most endowments where that private equity book has been self-funding the past three years, so our distributions Have paid for our capital calls over the past three years. Now, the sub asset classes…”
Venture Capital Represents Nearly 25% of Carnegie Mellon's Total Endowment
“For us, venture globally is a little less than 25%, the total endowment, so almost half of that private equity book.”
CMU Is 5 to 10 Percentage Points Overweight Venture Versus Peers
“I'd say we're overweight venture, but I call it anywhere from five to 10 points versus most other endowments of our size. We're underweight hedge funds and real assets, which would be real estate and natural resources”
Mature Venture Funds Yield a Median 8% Net IRR
“The median IRR is about eight percent net for that asset class, and the top quartile is a bit higher, 15%, but the MOIC is about two and a half x, right?”
Top-Quartile VC Funds From 1998-2015 Yield 1.8x DPI
“Top quartile DPI from 1998 15 year vintage funds per vintage year up until 2015 is 1.8 X top quartile.”
$50M to $100M Seed Funds Are the Worst Market Position
“I find it really funny how all LPs love 50 to a hundred million dollar seed funds, and when you actually run the maths now on average seed fund, seed round sizes, that's the worst place to be.”
Multi-Stage VC Is 70% Access, Early-Stage Is 70% Picking
“I would say if you are a multi-stage firm that is, you know, deploying large checks at scale. 70% access. 30% picking. If you are a small and nimble early stage fund that is trying to break into the mold, I'm gonna say it's, you know, 80%, 70% picking. I'll fl…”
CMU Endowment Commits at Least $10M to $80M-$1B Funds
“For us and our commitment size, which at the low end, call it ten million bucks anything from at the low end, we'll do an eighty million dollar fund at the high end, you know, anywhere from 400 to a billion, right?”
Union Square Ventures Is the Best at Active Portfolio Selling
“Union Square broadly, and we're not an investor there, we wish we were, but I think they've perennially been the best at selling, and they've got a very strict protocol that they run through, you know, from years eight to 12 on those funds, and with those foun…”
CMU Endowment Prefers Cash Distributions Over Stock to Avoid Pricing Lags
“We like them to distribute cash versus stock. Reason being, if they distribute stock to us, there is sometimes a time lag between when we sell that and when others sell that, and so there could be a one to two percent pricing discrepancy on that versus them di…”
Accel and Sequoia Hold Portfolio Books at 20% to 30% Discounts
“Usually the multi-stage firms think your perennial, like Excels, Or Sequoia. They're taking very aggressive discounts on, on basically all of their securities. Even if it's a great company that is maybe achieving even a higher price on the secondary market, th…”
CMU Independently Underwrites Top 10 NAVs for Manager Diligence
“20, 21 caused us to create new muscles in regards to underwriting as a group as well. And so for any re-up or any new manager, we diligence, we'll look at the top 10 company navs. Within that general partnership, we'll underwrite those companies ourselves. And…”
Premier VC Firms Rely on Brand Over Systematic Sourcing
“I think there is no systematic sourcing strategy. It's the partners and the brands are so strong and they're so networked in the, you know, S tier founder community that they're just in, they're just gonna be a first call for a lot of these firms.”
CMU Endowment Conducts 20 Reference Calls for New VC Funds
“I mean, we're, the way we think about referencing, you know, when we do a new fund, we're looking for at least 20 references calls, right?”
CMU Focuses GP Diligence on Interpersonal and Partnership Risk
“Perspective on strategy, not so much. We are very much trying to find interpersonal risk and partnership risk. Those are, two things that we are really digging.”
Recent VC Partnership Turnover Exceeds Previous Eight Years Combined
“The amount of change you've seen at partnerships over the past two years is the most I've seen combined in my, you know, eight year histories in LP.”
Carnegie Mellon Rarely Invests in VC Spinout Funds
“Yeah, we historically have not done many, if any, spinouts.”
Carnegie Mellon's Endowment Backed Kevin Hartz's A-Star
“Kevin Hart's at A-Stars is, is, is a new partner of ours, and he was at Founders Funds for a few years.”
Early-Stage Venture Funds Require 15 to 18 Years to Liquidate Fully
“If you're in an early-stage venture fund, it's gonna take at least 15 years for that fund to be wrapped up, probably 18. Right. To be fully done. All positions liquidated.”
Carnegie Mellon Targets 25-Year, Three-Fund Commitments With New VCs
“And when we back a new manager, we want to back them for at least three funds. So call it, you know, 25 years of an illiquid relationship.”
Ideal LP Concentration for VC Funds Is Under 10%
“Yeah. Yeah. Yeah. I mean, best case scenario, you don't have anyone more than 10%, but if you're raising a fifty million dollar fund or a hundred million dollar fund and you can, you know, secure a 10, 20, thirty million dollar check and they're long term alig…”
Only Five US Endowments Face the 8% Tax Rate
“In, in particular, certain endowments where they're going to start getting taxed at the eight percent range. That's five endowments.”
US Endowments Need an 8% Return to Maintain Purchasing Power
“The way an endowment works, you got a five percent draw every year, and then inflation is called three percent for higher education here in the U.S. So just to maintain the corpus, the purchasing power of that endowment, you need the eight percent return, righ…”
Lack of Distributions Is the Main Headwind for VC Re-Ups
“It'll still be the idiosyncratic headwinds of there's just no capital coming back from venture, right? That's the headwind to the asset class for LPs re-upping today.”
Selling Management Company Stakes Is a Massive LP Red Flag
“It's a, it is a massive red flag for us, and I would say most institutional LPs.”
CMU Endowment Targets a 4x Net Return on Venture Fund Investments
“And so for us, when we do a venture fund, our target is a forex net. That's our goal.”
$7B Multi-Stage VC Funds Require $800B in Exit Cap for 4x Net
“You're close to, you know, eight hundred billion of market cap needed to return a Forex net for those multi-stage funds. Now, for reference, twenty-twenty-one, the best exit year of all time, there was 850 billion-ish of market cap exit value from that year. O…”
Only 11 Venture-Backed IPOs Have Surpassed $50B in Market Cap
“There's been 11 fifty billion dollar IPOs ever. Venture backed. 11. Ok? The two largest venture backed IPOs ever, Or Facebook in 2012 and Alibaba in 2014.”
$100B Venture IPOs Will Remain Rare Generational Outcomes Through 2035
“So, so my guess is that a hundred billion dollar IPO over the next 10 years is still going to be a generational outcome. And so the question I throw back is, you know, do you think there's going to be 10, 20 A hundred billion dollar plus IPOs. I do not think s…”
Index Ventures Is the Largest Shareholder in Figma, Dream Games, and Wiz
“Largest shareholder in Figma, largest shareholder in Dream Games, largest shareholder in Wiz you know, second largest shareholder in Scale.ai, Revolut.”
Index Ventures Has the Most Performance-Driven Culture Seen by CMU
“And they don't, they are the most performant driven culture that we see.”
$1B to $2B VC Funds Like Index Will Continue to Thrive
“I absolutely think they will continue to survive and thrive at that range.”
Figma Will Likely Price Between $20B and $25B
“It's probably going to, we'll see where it prices, call it 20 to twenty five billion.”
Owning 10% of a $20B Company Returns 0.2x for a $7B Fund
“If you're a GC, their last fundraiser, seven billion, say you own 10% of a Figma, which is a generational company, two billion, you know, they're going to take 20% of that. I mean, you've returned what? Point zero point two X. You need 15 Figma's.”
Wiz's $30B Outcome Returned Only One-Third of Insight's Fund
“Wiz, which was obviously a, you know, 30, thirty one billion dollar outcome, you know, the GDP of the country. And it returned a third of Insight's fund.”
Mega-Scale Venture Funds Are the Highest-Margin Businesses Ever Created
“These business models, these GPs are creating are some of the best high margin businesses Ever created, right?”
Venture Capital Fee Structures Must Change for Large Funds
“You know, we really try to understand has the magic bond been broken between GPs and LPs, which, you know, leads us to, you know, like we think the fee structures need to change to accommodate for that.”
Large Venture Funds Charge 2-and-20 Fees for Passive Investing
“You are essentially acting as a long only public equity investor, right? You're not, you know, actively, you know, managing the company. They've got their own HR team. They're doing all their own hiring. You know, they've got a 20 person product team. They've …”
Active Early-Stage VC Management Drives Bad Decisions
“I work with many, and when they actively manage, they do not get the right decisions. They push managers to do things they shouldn't do. They push them to go enterprise before they should, push them to do more products, push them to scale faster, take more cas…”
Managing $15B in VC AUM Guarantees Billionaire Status
“If you had fifteen billion in AUM, which, you know, God bless, I hope you do someday you're gonna become a billionaire off that fund. Off those funds, right? And that's the difference, right? Is, is you need that capital as a true early-stage venture capital f…”
VC Fee Structures Will Never Change Due to LP Lack of Leverage
“So we're never gonna get this fee structure change.”
CMU Endowment Is Willing to Pay 2.5% Fees and 30% Carry
“If you're raising you know, that early stage fund, the core five hundred million dollar Series A fund, charge us your, you know, two and a half and 20, and if you're good enough, two and a half and 30. We're okay with that, right?”
Growth VC Funds Should Charge 1% Management Fees and 10% Carry
“But those growth funds that are really for scaled businesses that are mature assets, like, you should be charging long-only public equity fees, which are one in 10, and if you really love your LPs, it'd be zero in 10, but, or budget-based, right? Based on the …”
Carnegie Mellon Never Re-Ups in VC Funds Out of Loyalty
“Us, no. I mean, we are in an extreme performance-driven culture.”
Some LPs Choose to Ignore Huge GP Management Fees
“I think certain LPs choose to just not even think about it, frankly.”
LPs Shouldn't Blame GPs for Raising Massive Funds
“I'll never blame you for doing that, and I'll never blame a GP for, I'll never bash a GP saying, oh, how dare you, right? It's the market, like, and you're, you've obviously done something well enough that's allowing you to raise that capital. It's our choice …”
Mark Suster Aggressively Sold Portfolio Stakes During the 2021 Market Peak
“Mark Suster, I give him all the credit in the world. He's been in the game for a long time and upfront. He saw 20, 21 as an insane period. And he strip sailed like majority of his portfolios and his funds. For a very good price. DPI in the pocket. Like I, all …”
US and European VC Fundraising Will Hit Multi-Year Lows
“We'll see what, you know, Q three and Q four look like, but in the U S this is going to be the lowest year since 17 in Europe. Same. So it goes back a bit further, maybe to 20 16.”
2002-2004 Raised More IPO Dollars Than 2022-2024
“2002 to 2004. You had more dollars raised in the public markets from IPOs than you did from 2022 to 20 24. And with an asset class, 10 times the size.”
IPO Markets Are Never Closed, It Is Purely About Price
“And I am not a believer ever that the IPO markets are closed. It's purely a function of price, right?”
Private Equity Will Not Save the Venture Market
“I think PE is not coming to save us, like everyone thinks it will.”
Carnegie Mellon Requests Detailed Financial Metrics for Top 10 Fund Assets
“We ask for trending revenue, trending gross profit, and trending free cash flow for the top 10 nabs of every, every fund of we underwrite.”
CMU's 2012 VC Fund Will Add 3x Return in Year 13
“This is a 13 year fund that is essentially going to do an extra three turns on the fund in its 13th year.”
Selling Venture Secondaries Risks Forfeiting Late-Stage Fat-Tail Returns
“And so that is, that's the risk Of selling secondaries as a long-term venture investor is that you're going to have these crazy right-tail outcomes in the fund that could come to fruition at years eight, nine, 10, 1112, 13, that you're traditionally, even if I…”
CMU's Venture Book Is Self-Funding for the First Time Since 2021
“We are thankful to say that we're now self-funding in our venture book this year, which is give us a round of applause. I mean, it's the first time since 2021.”
Top Companies Delayed IPOs Because Private Capital Was Cheaper Than Public
“For the longest period of time, private market capital was cheaper than public market capital, which is the most mind boggling statement as like a fundamental investor ever. Like it's hard to fathom that, right? But that was the case. And so that is why the be…”
Public Markets Are Ready for IPOs and VCs Should Take Companies Public
“The public markets are now pricing risk very differently than they have over the three, the last three years. You look at circle, you look at, you know, Nebius, you look at core weave, you look at Palantir, you look at cloud flare. Like these are all businesse…”
Venture Needs Multiple Years of Strong Liquidity to Fully Recover
“It's been such a dearth of liquidity over the past three years that, like, one year is not gonna solve the industry's problem, right? So we're gonna need, like, multiple years of really good liquidity to get back to a normal state”
CMU Endowment Invested in Only One Sector Fund in 3.5 Years
“You know, we've done one new sector focus fund over the past three and a half years.”
Carnegie Mellon Backed a China Fund Returning Over 20x Net
“We had a fund out of China that produced over a 20 X net return to LPs.”
Top Chinese Founders Are Shifting Fundraising to US, Singapore, and London
“And frankly, you know, a lot of the best, you know, Chinese founders have chosen to raise elsewhere, whether in the US or Singapore or London it's a tough place.”
Wiz Deal Approval Will Trigger a Big Tech Acquisition Spree
“I think if Wiz gets approved, I think Every other large Mac seven company is going to see a green light in regards to making big, splashy acquisitions again, which is a good thing.”
Big Four Tech Giants Generate $600B in Annual Operating Cash Flow
“You look at Google, Microsoft, Amazon, and Meta combined, I mean, they're doing six hundred billion of operating cash flow, just cash coming off the company every single year”
Wiz Acquisition Features the Largest M&A Breakup Fee Ever
“You look at the Wiz deal, There's a 10% breakup fee there. Largest breakup fee ever for an M&A transaction.”
An AI Bubble Popping in Equity Markets Is Inevitable
“This would be the ultimate anomaly if a bubble did not pop in AI, right? You look at past historic, incredible technological moments, right? You think of the railroad, you think of cars, you think of electricity, you think of steamboats, you think of the inter…”
Hyperscalers Will Invest $1T in CapEx From 2024 to 2027
“When you look at the hyperscalers, just take them, for example, you look at, you know, 20, 24 to 20, 27 estimates, it's a trillion dollars of capex they're putting into the ground.”
NVIDIA's Financials Show Negative Revenue Growth Every Three Years
“NVIDIA is a cyclical business at the end of the day. You look at their historical financials over the past 20 years, essentially like every three years, they've had extreme negative year over year revenue growth. Now it rebounds, right? But this is a hardware …”
The Venture Capital Industry Overrates Founder Friendliness
“I think we way overrank founder friendliness.”
Carnegie Mellon Endowment Does Not Screen VC Managers for Founder Friendliness
“Yeah, I mean, we do not, when we're sourcing and we're doing reference work, that is not something we try to dig out. Like we want the most founder friendly GPs. That's not something we source for.”
Half of VC Firms Falsely Claim They Will Never Raise Over $400M
“I would say Miles, this is the perfect fund size for us. We want to be a union square. We want to be a benchmark. 300 to four hundred million, this is the perfect size. We're never going to raise a bigger fund. I hear that. I kid you not. At least every other …”
GP Commitment Is a Top Forward Indicator of VC Performance
“Frankly, like we have two quantitative data points outside of fund size and pass returns that are the best forward looking indicator for future returns of our funds. And one of them is is GP commitment.”