The Center for Private Equity and Entrepreneurship at Dartmouth's Tuck School of Business treated me and a couple journalists to a nice breakfast at Il Fornaio earlier this week. Colin Blaydon, director, and Fred Wainwright, executive director, shared their views on the current venture capital and private equity climate.

One thing they're doing for the private equity landscape that got me thinking whether it could be applied to venture capital is measuring how much a private equity firm adds value to each portfolio company it invests in. They said there are three ways for private equity firms to do this:

1) Buy Low, Sell High - This could be done by breaking up a conglomerate, for example.
2) Financial Engineering - Usually done by putting on as much debt as possible before the value turns down.
3) Improve Cash Flows - This can be achieved by growing the top line, taking out structural costs or improving gross margins.

Venture capital is more of an art than the science of private equity, where the investor owns a majority stake and actually controls its portfolio company. In venture capital, you hear about introductions, strategy advice, product expertise and the like, but, I wonder if there are quantifiable ways to measure the contribution venture capitalists makes to their companies.

Tags: dartmouth, tuck, vc, venture+capital