The "shake out” of venture capital firms has been much worse than previously reported, according to a survey conducted by venture firm OV Partners.

Based on OVP’s figures, 1,156 firms made deals in 2000, according to OVP’s Web newsletter. In 2006, the number dipped to 597. That decline is much steeper than the 15 percent drop reported by the National Venture Capital Association in its annual report, OVP said.

OVP, which was founded in 1983 and has more than $750 million under management, used the criteria of whether a venture firm was “active” to determine the number of working firms.

“We think that is the big, so far unwritten, story,” OVP said in the newsletter. “The U.S. venture industry has been cut in half. That certainly qualifies as a major shake-out.”

The NVCA reported 798 firms in existence in 2006, down from a peak of 946 in 2001 before the “dot com” and telecom bubbles burst.

“There were a gaggle of new funds of the bubble era under $100M. Most of them have died (see shake-out), with a few succeeding and increasing their scale," OVP added. "Since 2000, and particularly recently, there has been a flight to quality."

However, the overall state of the VC industry is not grim, OVP said.

“So, the second unwritten story of the bubble was not so much the billion dollar funds that cut themselves back, but the hordes of small funds that messed up the market by investing in the seventh company in a given space, failed, and then quietly went away,” OVP said.

For more about OVP’s analysis, click the .