Callow: It’s Folly To Ignore PEIGG –

Dear Editor:

I applaud your editorial comments in this month’s VCJ regarding PEIGG. I have been speaking to many VCs about the topic and, indeed, many are quite uninformed about the PEIGG information. Their limited partners are, in many cases, also not yet fully aware of the importance of this topic. Ignoring PEIGG will not keep attention away from the VC market.

This topic is being discussed frequently under Prof. Colin Blaydon’s leadership at The Private Equity Center at Dartmouth College’s Tuck School, where I am a Board Member. The work of the PEIGG group is to be applauded. Its recent work product should not be placed in a drawer to become dusty and irrelevant. I would suggest that the industry leaders develop “PEIGG 2,” which would include a recommended framework and process (that could be implemented practically) for establishing better fair-market valuations during the coming months.

Our firm has begun reporting both traditional and PEIGG-based valuations as a way to educate our LPs, as well as to more fairly represent portfolio values. We also are seeking outside verification for these newly reported values. It is significantly more work to do a complete job using PEIGG; however, I am convinced that because of the attention we provide to this topic our LPs are getting more accurate and fairer representation of the values of their investments.

Perhaps if more firms began this process now they would be prepared for the coming regulations, which are inevitable and no doubt will make managing a VC fund more challenging in the future. Several leadership groups exist which could collectively take PEIGG to the next level. Together the NVCA, ILPA members, The PE Center and other leadership groups need to address this topic on a broad basis this year and not wait until 2006.

Dana Callow

Managing General Partner

Boston Millennia Partners

Editor’s Note: I couldn’t agree more. Please see Senior Editor Jerry Borrell’s story on page 40 about looming PE regulation and why it appears to be inevitable. It’s part of our special report on the presidential election and the issues that confront the venture industry as it ponders whether to support President Bush or Sen. Kerry. The special section starts on page 22.