It looks like 2005 is the year U.S. venture capital shakes off its tarnished reputation and gets back to business as usual. There's a growing pool of venture dollars just waiting to be put to work. Investments are up. Valuations are up. What more could you ask for?

How about a million-dollar investor that can also bring you entry into huge new markets, cutting-edge technology and teams of development engineers? That's just what entrepreneurs are getting when they look beyond--way beyond--the usual lineup of U.S. venture funds.

Distance Vision

Adi Sideman, CEO of Oddcast Inc. in New York City, looked all the way to Japan for both money and markets. Oddcast makes web-based avatars-lifelike animated characters that act as virtual hosts on companies' websites. The company has over 3,000 customers throughout the world but needed a shot in the arm to grow to the next level. "We were looking for strategic investors, not just institutional investors," says Sideman, 35.

It didn't take long for Oddcast to find Itochu, one of the largest conglomerates in Japan. "Between 2001 and 2004, they watched our progress and eventually invested in us," Sideman says. "Today, they are one of our best partners." Since Oddcast was built with money from angel investors, Itochu is the company's only institutional investor.

And what an investor: Besides deep pockets, Itochu has operations in everything from textiles to satellites, including deep R&D capabilities and broad distribution in the vast Japanese mobile-phone market. The Itochu partnership quickly had Oddcast's avatars packing up their bags and moving to thousands of websites around the world. Oddcast's avatars will soon appear on mobile-phone screens and provide mobile-phone users with Tokyo's weather forecast or updates on the Hanshin Tigers' baseball scores.

"Multiple products have come out of this platform thanks to the Itochu investments," says Sideman. And he's quick to point out that this kind of business growth could not have come from U.S.-based venture funds, which invest primarily for financial returns.

Japanese investors are less concerned about financial returns on their U.S. investments than long-term strategic relationships, says Roger Brook of Japan Venture Partners in Raleigh, North Carolina. Japan Venture Partners helps U.S. technology companies find strategic allies and investors in Japan and other parts of Asia. "Financial criteria take a back seat to the strategic considerations-what kind of revenues can they generate by selling the company's product?"

"Most of the [Japanese] capital available for U.S. companies comes from strategic corporate investors," says Brook. "Usually, some strategic relationship has to happen first, before an investment is made." In the case of Oddcast and Itochu, there was a clear strategic benefit to both companies as they shared ideas and development tasks before the investment. And not surprisingly, along with the investment, Itochu negotiated for the rights to distribute the avatar technology in Japan.

If Asia is on your radar, do your homework, advises Brook. You'll probably need to find a company with strong distribution capabilities in your market. "In most cases, a company like Itochu may invest in a U.S. company," says Brook, "but their real interest is in selling the product in Asia."