Miles Dieffenbach

Most allocators are not being paid for venture’s risk. Ron cites mature-vintage returns of roughly 8% median net IRR, 15% top-quartile IRR, 2.5x top-quartile TVPI and 1.8x DPI; against QQQ, only top-decile managers consistently outperform. His gate for new LPs is therefore stark: unless they can access that tier, “90% of LPs shouldn’t be investing in venture.”

A $7 billion multi-stage fund can require nearly an entire record exit year to achieve one target return. At roughly 5% dollar-weighted entry ownership, the fund deploys into $140 billion of enterprise value; generating CMU’s 4x net target requires at least 6x gross, or approximately $800 billion of exits versus roughly $850 billion across the entire market in 2021. Harry argues outcome sizes could explode; Ron concedes “we could be wrong,” but refuses to underwrite without a margin of safety.

The IPO market is not closed—the price expectations of private holders are misaligned with public alternatives. Ron contrasts a $100 million-ARR SaaS company growing 15% around breakeven with Microsoft growing revenue 14%, earnings 17%, producing GAAP profits and buying back stock. With public capital again rewarding companies such as Circle and CoreWeave, his message is categorical: “Now is the time. Please take your companies public.”

Manager underwriting is ultimately about people, incentives and ownership of past wins, not polished track-record tables. CMU seeks at least 20 references, treats GP-provided references as the least informative and reconstructs partner-level attribution itself. Partnership failures usually reduce to “incentives” and “who’s working the hardest,” while a fund relationship can last 25 years—making patience more valuable than securing a fashionable allocation quickly.

Selling has become venture’s neglected fifth discipline, but premature secondary sales can destroy the right tail. Managers failed to sell sufficiently when software traded at 20x ARR—and 40x for top growers—in 2021, yet CMU’s own 13-year-old fund later gained roughly three additional turns from Circle after the position had fallen below $1 million of reported NAV. The lesson is not never to sell; it is that marks, liquidity needs and tail optionality must be underwritten separately.

Scaled growth funds increasingly charge venture economics for something resembling long-only public investing. Ron estimates one stacked platform with $15 billion across recent funds could collect roughly $300 million annually in fees; at that scale, he thinks growth vehicles should move toward 1-and-10, zero-and-10 or budget-based fees. He does not blame GPs for maximizing a remarkable business model, but asks whether “the magic bond” between GP and LP has broken.

AI can transform the economy and still produce severe losses for today’s capital providers. OpenAI’s improving unit economics do not eliminate its stated $5-$10 billion annual burn or roughly $70-$80 billion financing stack; unlike self-funding SpaceX, it remains dependent on capital markets. Ron also frames a possible Nvidia cycle—not a forecast—in which revenue falls 20%-30%, earnings 40% and the multiple from 38x to 24x, producing a roughly 70% drawdown even if the long-term AI thesis survives.

🔗 Original source & video: Miles Dieffenbach: Inside Carnegie Mellon’s $4BN Endowment & The Math Behind DPI, TVPI, Illiquidity