Investors see opportunities as tech boom sweeps Asia.

Developing assets overseas isn't just about call centers or software development any longer.

Taking a new look at cheap but maturing labor markets and emerging economies that make places like India appealing to technology firms, local venture capital firms have started setting their sights outside the United States.

"While we have not invested in companies that have a predominant portion of their activities offshore, we are certainly looking at the issues and opportunities there," said Murray Rudin, a partner with Los Angeles-based Riordan Lewis & Haden LLC.

To be sure, local companies remain a priority for many U.S. investors. But some foreign-based technology and biotechnology startups are becoming attractive, as are others that provide outsourcing and consulting services.

A big enticer: Start-ups can be grown cheaper overseas, said William Quigley, managing director of Santa Monica-based Clearstone Venture Partners LLC, who said he's looking at a potential investment in a telecommunications gear maker in India.

"In the U.S. it would probably take a $50 million to $75 million (investment) to reach break-even," he said. "Overseas it will be substantially cheaper."

The Indian company eventually could sell for $100 million or $150 million--"the range of valuations that exist today," he said. So an initial investment of $30 million in a comparable overseas start-up could yield better returns.

"It takes away one of the barriers for making the investment," he said.

Global venture investing isn't new to everyone. Irvine-based Ventana Capital Management LLC has an affiliated global unit that invests in Latin American start-ups through a Chile and Mexico venture fund. Past Mexico investment include Celsol SA de CV, a maker of solar energy products, and Colorantes y Oxidos SA de CV, a producer of iron oxide pigments.

Setting up shop

Venture firms in the Bay Area have done substantial spadework to launch overseas operations. San Francisco-based Walden International Investment Group counts offices in India, Malaysia, Singapore and other Pacific Rim countries that help invest its $1.5 billion in venture funds.

A desire for proximity, however, has kept Southern California venture capitalists closer to home. "We want to be close to our portfolio companies," said one L.A. venture investor who declined to be named. "These companies are new babies. They can go sideways in a very short period of time."

Additionally, venture investors here say that foreign stock exchanges aren't as efficient as in the U.S., making cashing out cumbersome.

Many venture capitalists are eyeing local companies with strong ties abroad.

"How private equity investors look at it is to invest in domestic companies that have established offshore relationships," Rudin said. "Maybe they do some portion of their manufacturing subassemblies in China. It may be that (the companies) outsource one particular function, like an accounting function."

Most technology start-ups here are all but required to have an overseas component, said Shivbir S. Grewal, an attorney at Newport Beach's Stradling Yocca Carlson & Rauth LLP who works with start-ups.

"Just about everyone that has any sense in the IT environment is going to do front-end work here but back-end work overseas because it's so much cheaper for them to do stuff there," Grewal said. "There are no serious IT companies today that are not doing that. So if you're doing a U.S. investment, in effect you are investing in assets that are overseas."

Middlemen

Another venture play: Invest in U.S. companies that hook up clients with outsourcing services from other countries.

One such company, Los Angeles-based Outsource Partners International Inc., offers clients finance and accounting services out of its Bangalore, India facility. Outsource nabbed $20 million in venture funding last year, in part from Palo Alto-based Trident Capital Inc.

Among those prepared to set up shop abroad is Gores Technology Group LLC.

"In the last year and a half we have been active in acquiring non-U.S, domiciled business--to us that means Europe," said Scott Honour. Gores' managing director. Until making the shift to direct overseas investment in 2002, the company had only taken interests in U.S.-based companies doing business abroad.

But European-based companies don't operate as efficiently as U.S. companies do, Honour said. Typically, private equity firms target under-performing companies that need a capital infusion or management, makeover or both. Then they reposition them for growth.

"There's a natural breakup play that's occurring (in Europe)," said Honour, who noted that Europe's private equity market is less developed than that of the U.S.

Foreign-based biotechnology start-ups and drug makers are sure to get a closer look in the next few years as countries seek to jump on opportunities in the health care sector.

"In the pharmaceutical field, you're getting a lot of generic drugs being developed overseas," Grewal said. In particular, India looks promising to venture and private equity firms.

"There are generic drug factory R&D centers there," he said. "'And, while it's not really happening yet, you will see some biotech R&D money going into places like India, which have intellectual capital in the biotech area."