HQ, Israeli Bank Close $55 Million Early-Stage Israel Fund –

SAN FRANCISCO/TEL AVIV, Israel – Eager to begin investing its oversubscribed $55 million vehicle, Eucalyptus Ventures recently held a final close on its first fund, which focuses on early-stage, Israeli-related technology and health-care companies.

“You can fund raise forever,” said Bruce Crocker, a managing director of the vehicle, which was created in 1997 and is sponsored by Hambrecht & Quist and Israeli investment bank Tamir Fishman & Co. “We were pleased with the [final] investor line-up.”

Limited partners include Teachers’ Insurance Annuity Association of America’s College Retirement Employee Fund; Eastman Kodak Co.; Dow Chemical Co.; Crescendo Venture Management (formerly IAI Ventures); Migdall Insurance, one of the largest Israeli insurance companies; Entrepreneurial Capital; and other United States, European and Israeli institutions and high-net-worth individuals.

Eucalyptus, which originally targeted $50 million, had all but secured its final commitments by the end of September, but some fine points needed to be ironed out before announcing the close, Mr. Crocker said. He added that he was quite pleased with the performance of Paul Denning and Jill Kitazaki of Hambrecht & Quist’s Private Equity Market Group, which was the fund’s placement agent.

“I think that we have some great names in this fund,” Ms. Kitazaki said. “[Fund raising] went pretty quickly compared to some of our other friends in the marketplace.”

Eucalyptus, which will invest in Israeli businesses and United States-based companies with significant operations in Israel, focuses on communications, Internet/intranet technologies, semiconductors and medical systems and devices. The fund has made three investments since its $34 million first close in late March 1998 (VCJ, June 1998, page 29): two Israeli companies, Mysticom, an intellectual property communications semiconductor company, and Cti2, a universal messaging provider; and XaCCT Technologies, a Santa Clara, Calif., Internet billing solutions company with research and development operations in Israel.

The firm touts itself as the only Israeli-focused vehicle with fund managers based in Silicon Valley and Israel. Mr. Crocker is stationed in Hambrecht & Quist’s San Francisco office and Co-Managing Director Aaron Mankovski, formerly of Kardan Technology Ventures, is headquartered in Tel Aviv. The firm in August hired Sharon Gelbaum-Shpan, an attorney who has worked as the in-house counsel for a number of Israeli technology companies, as an associate in its Tel Aviv office to round out its staff.

Deal flow will originate from Hambrecht & Quist and Tamir Fishman, whose founders, Eldad Tamir and Danny Fishman, will serve on the fund’s investment committee. Messrs. Tamir and Fishman, each with more than seven years of private equity investing experience, will not invest capital in Eucalyptus, but they will contribute significant “sweat equity” through their deal sourcing, Mr. Crocker said.

Eucalyptus’ terms were undisclosed, although Mr. Crocker characterized the vehicle as a “very standard VC fund.”