Index Strives To Peg True Value Of Venture Capital-Backed Firms; Tracks Clean, Not Dirty, Data; Sand Hill Index is result of a four-year effort by former SEC and HUD economist.(INTERNET & TECHNOLOGY)

Byline: BRIAN DEAGON

An economist has good news for venture capitalists: Your funds are doing better than you might think.

So says Susan Woodward, per the findings of her Sand Hill Index.

The index, unveiled late last year, is one of the most scientific attempts to put a value on privately held companies held in venture capital funds.

VCs, and private companies, are notoriously secretive. But Woodward, in short, uses what little data are out there, and extrapolates, to come up with the index. And she already has fans.

"We endorse Sand Hill's method," said Jesse Reyes, vice president at research firm Thomson Venture Economics. "It's rocket science. Other organizations have been trying to come up with a formula like this for years, without much success."

The good news of the Sand Hill Index is that the value of privately held firms actually rose 40% in 2003. That's way more than the paltry …