The success experienced by Jerusalem Venture Partners (JVP) in raising $350 million for its fourth JVP fund (called the JVP4) has astonished many local venture capitalists. After all, $350 million is a huge amount of money even for the euphoric days of 1999-2000, never mind in these days of a flailing hi-tech industry and political unrest. In fact, raising such a sum seems a fantasy to hundreds of Israeli VC's who have actually given up their fundraising and marketing activities because "It's simply a waste of time."

Not only has JVP succeeded in raising this huge sum, but on Tuesday morning, the fund's manager Erel Margalit said he hopes to raise a total of $500 million in this round, while admitting that even he is not quite sure that's possible. Nonetheless, what JVP has achieved is impressive. Fundraising for the JVP4 first began back in October 2000, just as all of the difficulties were starting to occur: the markets plummeted, the hi-tech industry fell into a deep crisis, and the political uprising by the Palestinians began in earnest.

Several months after this period began, Erel Margalit appeared in an interview in Business Week in which he explained how he placates the doubts and questions raised by investors about Israel. Several other funds raised large sums of money during the past year, but most of them began their fund-raising efforts before this troubled period began.

The Giza GE Venture Fund for example, announced several months ago that it had raised $200 million, most of which had been invested by General Electric (NYSE:GE). But even the fund's manager Zeev Holtzman knows that most of the money was raised while there were still blue skies over Silicon Valley and Jerusalem's Har Hotzvim hi-tech park.

Margalit had said that he would raise millions despite the current difficulties and he managed to keep his word. Institutional bodies, including such technology firms as France Telecom (NYSE:FTE), Infineon Technologies (formerly Siemens Semconductor Group, Boeing (NYSE:BA), Nortel (NYSE:NT) and Reuters, as well as financial institutions such as the financial funds of MIT University, Columbia and The Hebrew University of Jerusalem all agreed to invest once again with JVP. The fund's results are even more impressive when you consider that most of JVP's investments were made during the high-priced and heady days of 1999-2000 and we can safely assume that those who invested with the fund at this time have yet to see a return on their investment.

So how did JVP raise that amount of money from its investors, with almost no effort on the part of the fund's managers? This kind of success has three key elements. The first is Chromatis Networks, which was sold to Lucent Technologies (NYSE:LU) for $4.5 billion. Despite the crash of Lucent's share price from which JVP suffered badly, the profit rate from the fund's 15% holding in Chromatis was huge. JVP also organized that its internal return on the JVP2 fund would be carried out over a long period of time, causing others to believe in the veneer-like image of Erel Margalit as the kind of guy who knows when to buy and when to sell a company.

The second factor in the fund's success is Erel Margalit's fundraising capabilities. Margalit is not an engineer and he never studied computers and before establishing JVP he never worked for a hi-tech firm. Despite this, it appears that he has an incredible ability to convince people to invest in the projects he heads. He did this previously when he worked for the Jerusalem Municipality, and he did it when he worked for other funds. In recent years, he's done the same thing with venture capital funds and their portfolio companies.

But it may well be that the central reason behind JVP's current fundraising success is its third and final factor: the fund has transformed itself into a global venture capital fund, instead of just an Israeli VC fund. Perhaps that's Margalit's way of eliminating all of the problems associated with the current political unrest in Israel that worries his investors. IN the JVP4 fund, only 40% of the money raised will be used to invest in Israel, the rest will be invested abroad, with 40% going to the U.S. and 20% to Europe. JVP the company, as well as its latest fund, has already begun adopting this policy and a large portion of its investments are not made in Israeli firms. Are they still investing in the optical communications sector? Yes they are, but in the U.S.

The final proof that JVP is no longer an Israeli firm lies in the fact that it has just as many employees in its New York offices as it does in Jerusalem. It also has a London office. But perhaps the most interesting question of all is where will Erel Margalit be located? The company says that Margalit currently divides his time between New York and Jerusalem, but that in the coming year he will principally work from New York. With that, JVP has transformed itself into a global venture capital firm, one that simply has ties to the Israeli hi-tech industry.