NETANYA, Israel — Israeli venture capital funds raised $473 million in 2006, a 67 percent decline from the $1.46 billion achieved in 2005.

According to IVC-Online, the drop was anticipated since most Israeli VC funds completed their efforts in the previous two years, having raised a total of $2.52 billion between 2004 and 2006.

Funds that raised capital last year included Evergreen V (first closing, $135 million), Magnum II ($105 million) and Greylock Partners’ first Israel-focused fund ($150 million).

Seven other venture capital funds announced first closings during 2006 for a total of $83 million. These included Infinity III, Peregrine II, Evolution Fund I (focused on bootstrapped startups), two new clean technology funds – H2Tech and Terra – and a new Web 2.0 fund from Jerusalem Capital.

According to IVC estimates, $1.5 billion is currently available for investment by Israeli VCs, of which $900 million is intended for first investments in high-technology based companies. The remainder is reserved for follow-on investments.

An additional $700 million is expected to be raised in 2007 by Israeli VCs for investment in Israeli high technology.

Zeev Holtzman, Chairman of IVC Research Center and Giza Venture Capital, said: "It is expected that the next capital raising cycle of the leading Israeli VC funds — the fifth cycle since 1992 — will start later this year and will reach its peak in 2008."

Holtzman added he expects the remaining VC funds — those that last raised capital in 2000 and 2001 — will also try to raise follow-on funds.

"Therefore, capital raised in vintage 2007 is most likely to be higher than in 2006. Currently, capital available for investment by Israeli funds equals two years investment, a markedly shorter period than in the US, indicating that there is no oversupply of capital in the Israeli market," said Holtzman.