The Twenty Minute VC (20VC): Inside Carnegie Mellon's $4BN Endowment with Miles Dieffenbach

Release Date: August 4, 2025

In this illuminating episode of The Twenty Minute VC, host Harry Stebbings engages in a deep and insightful conversation with Miles Dieffenbach, the Managing Director of Investments at Carnegie Mellon University (CMU). Dieffenbach offers an exclusive look into CMU's substantial $4 billion endowment, delving into investment strategies, the evolving venture capital landscape, and the intricate mathematics behind key performance indicators like DPI and TVPI.

1. Personal Resilience: Overcoming Adversity

The conversation kicks off with Dieffenbach sharing a profound personal story that underscores his resilience and determination.

Myles Dieffenbach [00:00]: "The business models these VCs are creating are some of the best high-margin businesses ever created."

Dieffenbach recounts his battle with lymphoma at 26, highlighting how this life-altering experience reshaped his mindset and approach to challenges.

Myles Dieffenbach [05:00]: "Success in life is 10% what happens to you and 90% how you react to what happens to you."

This perspective not only fortified his personal resolve but also influenced his professional ethos, emphasizing adaptability and proactive problem-solving.

2. Overview of Carnegie Mellon's Endowment

Dieffenbach provides a comprehensive breakdown of CMU's endowment structure, emphasizing a balanced and strategic allocation approach.

Myles Dieffenbach [08:21]: "We manage $4 billion on behalf of the university. 85% of the endowment is equity, and 15% is fixed income."

This allocation is further divided, with half dedicated to private investments—including venture capital, private equity, real estate, natural resources, and private credit—and the other half to hedge funds and liquid assets. This diversification aims to optimize risk-adjusted returns globally.

3. Evolution of Private Commitments

Dieffenbach discusses how CMU's private investment commitments have evolved, especially in the context of self-funding through distributions over the past three years.

Myles Dieffenbach [09:25]: "Our private equity book has stayed relatively consistent, but venture has risen as distributions from buyouts have slowed."

Despite venture capital being the largest detractor in recent years, it remains a significant component of the endowment, reflecting CMU's strategic emphasis on high-growth potential investments.

4. Venture Capital Allocation and LP Considerations

A pivotal point in the discussion centers on the assertion that 90% of Limited Partners (LPs) should reconsider investing in venture capital.

Myles Dieffenbach [13:09]: "Do you think you're going to have access to top decile managers? Because without that, you're not achieving returns above PME consistently."

Dieffenbach argues that unless LPs can secure investments with top-tier venture capital managers, the risk-adjusted returns may not justify the exposure, citing historical median IRRs and MOICs that fall short of compensating for the inherent risks in venture investments.

5. Challenges with First-Time and Smaller Venture Funds

The conversation delves into the precarious position of first-time and smaller venture funds, highlighting issues like scalability, competition, and the difficulty of achieving meaningful diversification without substantial capital.

Myles Dieffenbach [15:29]: "Consensus seed deals are extremely hard to plan because multi-stage firms have all planted a flag at seed."

Dieffenbach critiques the prevalent preference for $50 to $100 million seed funds, pointing out the mismatch between fund size and the average seed round requirements, which hampers effective diversification and ownership stakes.

6. Sourcing and Picking: The Dual Pillars of Venture

Exploring the fundamental pillars of venture investment, Dieffenbach emphasizes the importance of both access and picking skills in successful venture capital.

Myles Dieffenbach [16:59]: "I think it's both. For multi-stage firms deploying large checks at scale, it's 70% access and 30% picking. For small early-stage funds, it's the opposite."

He underscores that while large, multi-stage firms benefit from extensive networks and brand access, smaller funds must rely more heavily on their ability to identify and select promising startups amidst fierce competition.

7. Evaluating GP Performance and Alignment

Dieffenbach outlines the rigorous processes CMU employs to assess General Partners (GPs), focusing on alignment of incentives, interpersonal dynamics, and historical performance.

Myles Dieffenbach [21:06]: "The number one reason partnerships break down is incentives and who's working the hardest."

He cautions against common red flags such as high fee structures and lack of genuine alignment between GPs and LPs, advocating for transparency and mutual goal-setting to ensure long-term partnership success.

8. The $140BN Problem with Multi-Stage Funds

A significant portion of the episode is dedicated to dissecting the challenges posed by increasingly large multi-stage venture funds.

Myles Dieffenbach [35:57]: "These funds are extremely large today, and it's hard to assume the same returns you had from 2010 to 2017."

Dieffenbach presents a detailed mathematical analysis, illustrating how the sheer scale of these funds necessitates unrealistically high market capitalization targets to achieve desired returns, thereby questioning the sustainability and performance viability of such large-scale investments.

9. Fee Structures and Their Impact on VC Dynamics

The discussion critically examines the prevailing venture capital fee structures, particularly the entrenched 2 and 20 model, and its implications for fund performance and GP-LP relationships.

Myles Dieffenbach [48:23]: "I puke when I see 3 and 30."

Dieffenbach advocates for a reevaluation of fee structures to better align with performance-driven outcomes, drawing parallels with the hedge fund industry's evolution post-Global Financial Crisis.

10. Liquidity Concerns and Future Outlook

Dieffenbach addresses the pressing liquidity issues facing the venture capital ecosystem, citing recent trends and the anticipated impact on fundraising and investment strategies.

Myles Dieffenbach [54:48]: "The main reason is liquidity. From 2002 to 2004, you had more dollars raised in public markets from IPOs than you did from 2022 to 2024."

He forecasts continued challenges due to restricted liquidity, urging venture capitalists to adapt by focusing on sustainable growth and realistic fund performance expectations.

11. China's Venture Landscape

Touching upon international venture markets, Dieffenbach shares insights into China's unique venture capital environment, highlighting regulatory headwinds and the strategic decisions of top founders.

Myles Dieffenbach [65:13]: "In China, GPs raise USD and RMB funds alongside each other, which creates alignment issues, especially now with US restrictions on AI and semiconductor investments."

Despite these challenges, Dieffenbach remains cautiously optimistic about China's potential, recognizing the hard work and ingenuity of local partners.

12. Founder-Friendly Practices and GP Conduct

Concluding the main discussion, Dieffenbach emphasizes the importance of being "founder-friendly" while maintaining rigorous performance and alignment standards.

Myles Dieffenbach [74:58]: "Founders are going to have weak spots. If you can supplement those with the right support, why wouldn't you?"

He advocates for a balanced approach where GPs provide robust support and candid feedback to founders, fostering growth and resilience within their portfolios.

13. Lightning Round: Quick Insights

In a lively segment, Dieffenbach shares candid thoughts on various venture capital topics:

• Fee Structures: Strong opposition to inflated fees, labeling them as detrimental to GP-LP relationships.

  Myles Dieffenbach [76:45]: "Any fund that raises over $4 billion on their growth funds, they're charging 2 and 20. I don't think they should charge that."

• Red Flags in GPs: Misalignment and exaggerated claims about fund sizes or sustainability.

  Myles Dieffenbach [77:08]: "The biggest lie GPs tell LPs is claiming their current fund size is the optimal and they have no plans to grow further."

• Underrated Emerging Managers: Highlighting Kevin Hart's team at Astars for their exceptional performance and strategic prowess.

  Myles Dieffenbach [78:14]: "Kevin Hart's team at Astars has done fabulously well with their premier access and performance-driven culture."

14. Final Thoughts and Takeaways

Dieffenbach wraps up the discussion by reiterating the critical factors for successful venture capital investment: rigorous due diligence, alignment of incentives, and a balanced approach to risk and reward.

Myles Dieffenbach [80:40]: "You need to over-index on the people. This is a people-driven business."

His insights provide a valuable roadmap for LPs and venture capitalists navigating the complexities of modern investment landscapes, emphasizing sustainability, ethical practices, and strategic foresight.

Key Takeaways:

• Strategic Allocation: Diversification between equity and fixed income, with a significant emphasis on private investments, particularly venture capital.

• Risk Management: Importance of accessing top-tier managers and understanding the unit economics and market dynamics influencing venture performance.

• Fee Structures: A call for reevaluating traditional fee models to better align with performance and long-term partnership success.

• Liquidity Concerns: Recognition of ongoing liquidity challenges and their impact on fundraising and investment strategies.

• Global Perspectives: Insights into China's venture capital environment, highlighting regulatory and strategic complexities.

• Founder Support: Balancing founder-friendly practices with rigorous performance and support mechanisms to foster resilient portfolio companies.

This episode serves as a crucial guide for LPs considering venture capital investments and for venture capitalists aiming to optimize their strategies in a rapidly evolving market.