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.

Dieffenbach argues venture only compensates LP risk when an allocator can consistently access top-decile managers; below that, even top-quartile returns do not beat the public-market alternative. Mature venture vintages delivered roughly 8% median net IRR; even top-quartile performance was about 15% IRR, 2.5x TVPI and only 1.8x DPI over 15 years. Against QQQ as Carnegie Mellon’s PME, his answer to whether LPs are compensated for venture risk is blunt: “Absolutely not.”

Carnegie Mellon runs its $4 billion endowment as an 85% equity, 15% fixed-income portfolio, with half the total in private assets and just under 25% in venture. That makes CMU roughly 5-10 percentage points overweight venture versus comparable endowments, but its overall private book remained self-funding through the liquidity drought, with buyout distributions contributing most. Venture itself finally became self-funding again this year, for the first time since 2021.

The hidden constraint on mega-funds is ownership: a $7 billion platform averaging 5% entry ownership effectively must create $140 billion of enterprise value before multiplying LP capital. To reach CMU’s 4x-net target after fees, Dieffenbach estimates it needs at least 6x gross, implying nearly $800 billion of exits—close to the entire roughly $850 billion exit value of 2021. Harry Stebbings argues future companies could be much larger; Dieffenbach concedes that possibility but asks, “What is the margin of safety?”

Seed investing remains a picking game where the founder or idea is genuinely non-consensus; consensus seed has become an access war against multi-stage capital. Stebbings argues a $50 million-$100 million fund cannot both buy meaningful ownership in today’s $4 million-$5 million seed rounds and diversify across roughly 30 companies. Dieffenbach’s counter is that Airbnb, Uber, SpaceX and Amazon all initially struggled to raise, preserving a potential moat around investors who can recognize what looks “crazy” before consensus forms.

Scale turns venture franchises into exceptional fee businesses long before it proves they remain exceptional investments. A platform with $15 billion across stacked funds might collect roughly $300 million annually in fees, while a generational $20 billion outcome can barely move a $7 billion vehicle. Dieffenbach would preserve premium economics for true early-stage investing but move scaled growth funds toward long-only fees—roughly “one and 10,” or even budget-based management fees plus 10% carry.

Illiquidity is primarily a pricing problem, not evidence that the IPO market is closed. From 2022 through 2024, IPOs raised fewer dollars than in 2002-2004 despite venture being roughly 10 times larger; meanwhile, private sellers still wanted multiples unsupported by public alternatives such as Microsoft. Public markets are now rewarding selected growth companies again, prompting Dieffenbach’s direct appeal: “Now is the time. Please take your companies public.”

AI can become a foundational technology while still producing a capital-destroying bubble, and OpenAI’s dependence on new funding is the key distinction. Dieffenbach says its unit economics are improving, but a company burning $5 billion-$10 billion annually with a perhaps $70 billion-$80 billion preference stack lacks the control of destiny enjoyed by profitable Google, Meta or self-funding SpaceX. Nvidia is not necessarily overpriced today, yet a cyclical downturn combining lower revenue, compressed earnings and a lower multiple could, in his scenario, produce a roughly 70% drawdown.