There’s a tough battle going on in VC-land over transparency, and the biggest skirmish right now is happening in Texas. Read this little summary by Dan Primack, and you’ll get the details.

We agree with Dan on this one. We at the Mercury News led the legal case here in California that pushed for transparency, but stopped short of asking for venture capitalists to disclose the valuations of their portfolio companies. We talked with scores of VCs while researching the case, and almost without exception they argued such dislosure would be a competitive disadvantage for both them and the start-ups they invest in. Almost all vowed that if they had public investors (state public universities or state pension funds) who moved to disclose such sensitive data to the public, they’d quickly seek to remove those public investors from participating in their next funds.

Almost all VCs are generally understanding of the need for some disclosure. For example, most agree that public retirees and taxpayers (represented by the public investors) should at least have the right to know the financial performance data of the VC funds. That oversight is important for numerous reasons, not least to help keep cronyism in check. That’s why the Merc and others pushed for such disclosure. But demands by some in Texas and elsewhere for even more data is pushing some firms, like Silicon Valley’s U.S. Venture Partners, to exlude public investors of any kind. That means that large California investors like CalPERS and University of California could get hurt too. Sequoia Capital has already moved to exclude UC and the University of Michigan, but again largely because of that fear they’d have to disclose even more detailed information down the line — at least that’s what they told us.

So where does this leave us? Public investors in Texas, California and elsewhere will either have to accept limited disclosure, or get out of the VC investing game altogether. For this cycle, it may already be too late. Even if the public investors accept limited disclosure, scared VCs can’t be sure whether those investors will change their minds and suddenly ask for more.