Carnegie Mellon's Miles Dieffenbach: Can Mega Funds Still Produce Venture Returns?

Nick Chirls (0:00)

How do you evaluate the people stuff?

Miles Dieffenbach (0:02)

I mean, there's a couple of very easy ways. Are you putting like your own cash into the fund? Ventures and asset class seems like pretty allergic to that concept. Would it hurt for you if this fund didn't do well? Do you experience the pain that we do, or are you just getting a free call option on our money? And if it hits, you win. If it doesn't, you've collected $30 million in management fees.

Beezer Clarkson (0:33)

This podcast is for informational purposes only and does not constitute investment advice. Please see full disclosures in the show notes and in the end of this episode.

Nick Chirls (0:42)

Welcome to Origins, the podcast that dives deep into the business of venture capital, where we learn how the people behind the capital, both GPs and LPs, make decisions. I'm Nick Chirls, GP at Asylum Ventures.

Beezer Clarkson (0:54)

And I'm Beezer Clarkson, your LP co-host and managing director at LGT Capital Partners.

Nick Chirls (1:00)

Today's guest is Miles Dieffenbach, managing director of investments at Carnegie Mellon University, where he oversees CMU's roughly 4 billion endowment. Miles' path into venture is distinctly unusual. He played Big Ten football at Penn State, a run in the NFL with the Pittsburgh Steelers, and now at Carnegie Mellon.

I think that makes him the unofficial Mr. Pittsburgh.

Beezer Clarkson (1:25)

Oh, I think it does. Behind that unusual path is more than a decade of experience allocating capital across venture, private equity and other alternatives. Venture alone accounts for nearly a quarter of CMU's total endowment, a notably larger allocation than you'll find at many peer institutions. That stat alone makes Miles read on where things stand in venture right now, even more interesting.

More so, he argues that 90% of LPs shouldn't even be in venture without real access to top decile managers, and that today's mega funds may not be able to produce venture style returns at all. Math, he's actually run the numbers on. This is a topic that we've seen trending in multiple places. We're going to dig into exactly why Miles feels this way, what in his opinion separates the LPs and managers who are actually set up to win, and what it takes for a venture firm to endure.

Nick Chirls (2:18)

Let's bring them in.

Beezer Clarkson (2:19)

Let's do it.

Miles, thank you so much for joining us on Origins today. And we want to start with how you got into venture, and your story is unusual and I love it. So I want you to help us unpack it. You were a team captain at Penn State before making it to the NFL with the Steelers. And now you've found yourself managing billions of dollars with Carnegie Mellon University. Tell us how you went from football to Carnegie Mellon billions.

Miles Dieffenbach (2:50)

Yeah, I mean, it started with a big, I'd say, life failure, you know, getting cut from the Steelers. So we'll start it on a high note. Yeah, I mean, my whole life goal was to play in the NFL. I was hoping to get drafted out of Penn State. I got signed as a priority free agent. And so I had like six offers and one of them was from the Steelers. I was with them through preseason, played in four preseason games, and then got cut. And so at that point, one, like I needed a job, I didn't have any money. I was 310 pounds at my peak. And I had up until that point in my life, like how fortunate I was, I had never paid for myself to be that large.

My parents paid for my food growing up. In college, I was on scholarships, like all my food was paid for. And then at the Steelers, all your food is paid for as well. And so like I was spending like insane amount, I was eating like 7,000 calories a day. So that was like draining my bank account very quickly, just to say that largely. Yeah, I didn't get picked up in two months and needed a job. So I would have taken any job that anybody gave me. So I joined CBRE, which is a brokerage company, and then kind of quickly thereafter, joined a real estate private equity firm. So that was like my foray into private markets and investing.

So I was at the private equity firm for a couple of years. It was my awakening to the world of finance. So as two years ago by, I saw a job posting at the CMU endowment. I didn't know what an endowment did. I knew that my scholarship at Penn State came from the endowment, but I was reading the job description and it seemed like very, very, very intellectually stimulating. It was a small team, was a global mandate, so we invest across the world. The role was a generalist role, so you invest across asset classes.