In tech field CIA spied a chance for growth: It funds start-ups and reaps progress

Hopelessly lagging the freewheeling high-tech entrepreneurs of the day, the nation’s spy agency recognized it needed better access to cutting-edge technologies to carry out its mission of collecting, analyzing and communicating intelligence data. But rather than sending covert agents, the agency took a more direct approach: It began knocking on doors with money. And for once, the CIA made no secret of its plan.

Sunday, July 29, 2007
BY J. SCOTT ORR
Star-Ledger Staff
WASHINGTON

In 1999, the CIA decided to infiltrate Silicon Valley.

That September, the CIA announced the formation of In-Q-Tel, a nonprofit corporation it funded to provide venture capital to high-tech start-ups. Its mission was twofold — to encourage the development of technologies and to build bridges to entrepreneurs outside the government-contracting food chain.

Eight years later, In-Q-Tel is hailed as an unqualified success, having invested millions in start-ups, leveraged the investment of others and, perhaps most important, established solid ties in Silicon Valley and elsewhere that have helped the CIA and the larger U.S. intelligence community catch up in the race for the latest spy gear.

Donald Tighe, In-Q-Tel’s vice president for external affairs, called the company a "technology accelerator" that has succeeded in bringing countless developments to the attention of the intelligence community.

"Our job is to serve as eyes and ears looking outward to the start-ups, entrepreneurs and innovators in the early commercial technology fields to find capabilities that match current and future intelligence community needs," he said.

Even though In-Q-Tel is a private, nonprofit company, its finances are secret because of the ties to the CIA. Tighe said, however, that most investments are in the range of $1 million to $3 million. It has invested with more than 90 companies for a total of between $90 million and $270 million, he said.

A NEW MODEL

Bernard Golden, who had a hand in setting up In-Q-Tel and is now the CEO of San Carlos, a Calif.-based open source management consulting firm Navica, said In-Q-Tel has helped start-ups develop technologies much faster than the CIA could have on its own.

"The models they had in place just weren’t successful. There were shortcomings in the way the intelligence community was traditionally getting access to technology," he said. Only after a technology is developed, he said, does the CIA acquire it and adapt it to its more secretive purposes.

"They decide that they think this technology might have some application to their mission, then they acquire it through traditional channels. ... This (In-Q-Tel) is the public face of it, then it gets into the CIA," he said.

While it consults with the CIA on "the strategic fit and mission value" of particular ventures, decisions on investments are made independently by In-Q-Tel’s board of trustees and CEO.

Board members come from the high-tech industry and academia and include James Barksdale, the founder of Netscape; Jeong Kim, president of Lucent’s Bell Labs; and Charles Vest, president emeritus of the Massachusetts Institute of Technology. The board is chaired by Michael Crow, president of Arizona State University, and the company’s CEO is Chris Darby, former vice president of Intel.

LAGGING BEHIND

The CIA readily admits it was ill-equipped to gain access to the latest technologies in the years leading up to the creation of In-Q-Tel: "In contrast to the remarkable transformations taking place in Silicon Valley and elsewhere, the Agency, like many large Cold War-era private-sector corporations, felt itself being left behind," reported an article from the Defense Intelligence Journal published in 2000 on the CIA’s Web site.

In-Q-Tel’s success has not gone unnoticed in other federal agencies and several — including the Pentagon and NASA — have set up similar operations to get close to sources of new technology.

Over the years, In-Q-Tel has invested in companies developing hardware and software for surveillance, communication, data management, imaging, mapping, foreign language translation and many other purposes. The companies are listed on In-Q-Tel’s Web page (http://www.inqtel.org) and generally offer their products for use by the private sector as well as the federal government.

While In-Q-Tel and the CIA don’t like to discuss the uses of specific technologies developed through the company’s investments, former CIA Director George Tenet mentioned in a recent book two cases in which seemingly unrelated technologies yielded benefits for the intelligence community.

"This highly unusual collaboration between government and the private sector enabled CIA to take advantage of the technology that Las Vegas uses to identify corrupt card players and apply it to link analysis for terrorists, and to adapt the technology that online booksellers use and convert it to scour millions of pages of documents looking for unexpected results," Tenet wrote.

INNOVATING AND IMPLEMENTING

One of the best-known companies funded in part through In-Q-Tel is Keyhole, the Mountain View, Calif., company that pioneered rich-mapping software combining satellite images, aerial photography and other data to produce detailed, searchable maps. Keyhole was acquired by Google in 2004 and provided the technology for the wildly popular Google Earth.

When In-Q-Tel invested, Keyhole’s technology was being developed as an aid to real estate companies, Tighe said. "In-Q-Tel’s engagement with the company significantly accelerated the intelligence community’s exposure to the innovation and implementation of the capabilities," he said.

Sean Varah, CEO of MotionDSP in San Mateo, Calif., has been working with In-Q-Tel since around 2000. He helped link In-Q-Tel up with Keyhole and recently received funding for his current venture through In-Q-Tel.

"They really encourage companies to develop the commercial application. The whole purpose is to encourage commercial development of technologies. They understand that government can’t develop all of the technology that it needs," he said.

Though he said the CIA maintains its own research and development operations, Varah believes In-Q-Tel is a worthy supplement to the kind of secret government lab that was run by James Bond’s fictional gadgetmeister "Q." The "Q" in In-Q-Tel is said to be a reference to Bond’s technology wizard.

"The burn on Q’s lab would probably be, say, $80 million a year, and eight of 10 things Q comes up with in his lab probably don’t work. Now, take that same money and invest in 80 or 100 companies and the return is going to be better," he said.

Varah said companies need not fear that In-Q-Tel’s association with the CIA could lead it to try to control young start-ups.

"There is some paranoia or worry that they’re going to direct where you’re going, but that hasn’t been the case. They let the companies develop their technologies just like any other venture capitalist," he said.

While In-Q-Tel is unique in that it targets start-up companies it might not otherwise encounter, the CIA has a long history of contracting with established companies to develop secret spying equipment.

Perhaps the most successful is the so-called "skunk works" at Lockheed Martin, which worked with the CIA and, under a contract to the federal government, secretly designed and built a series of spy planes and other aircraft beginning in the 1930s.

http://www.nj.com/news/ledger/index.ssf?/base/news-12/1185683257242790.xml&coll=1