In-Q-Tel, CIA's Venture Arm, Invests in Secrets

Gilman Louie is chief executive of In-Q-Tel, described as the venture-capital arm of the Central Intelligence Agency.
Gilman Louie is chief executive of In-Q-Tel, described as the venture-capital arm of the Central Intelligence Agency. (By Julie Jacobson -- Associated Press)
By Terence O'Hara
Monday, August 15, 2005

When inventors James MacIntyre and David Scherer founded Visual Sciences Inc. in 2000, doing work for the Central Intelligence Agency was not in their plans.

The two men had developed software that could monitor and graphically display patterns in complex information systems. A bank marketing executive using the software could determine which online customers were clicking on links to information about home equity loans, then display information about those customers.

It takes no great leap of imagination to envision a CIA analyst using the software, connected into the right databases, to track terrorist activities. But it took In-Q-Tel to make that leap.

The nonprofit organization, funded with about $37 million a year from the CIA, last year made a small investment in Visual Sciences and paid the McLean company a fee to license its software to the intelligence agency. For Visual Sciences, which has 50 commercial customers and has been profitable for two years, it was a way into the federal sector without the bureaucratic hassles required to compete for contracts.

"In-Q-Tel provided a buffer from being a real government contractor," MacIntyre said. "I still don't know how our technology will apply to the CIA."

In the five years since it began active operations as the "venture capital arm" of the CIA, In-Q-Tel's reach and activities have become vast for so small an operation. It has invested in more than 75 companies and delivered more than 100 technologies to the CIA, most of which otherwise would never have been considered by the intelligence agency. Virtually any U.S. entrepreneur, inventor or research scientist working on ways to analyze data has probably received a phone call from In-Q-Tel or at least been Googled by its staff of technology-watchers.

Born from the CIA's recognition that it wasn't able to acquire all the technology it needed from its own labs and think tanks, In-Q-Tel was engineered with a bundle of contradictions built in. It is independent of the CIA, yet answers wholly to it. It is a nonprofit, yet its employees can profit, sometimes handsomely, from its work. It functions in public, but its products are strictly secret.

Over the years, some critics have dismissed In-Q-Tel as a government boondoggle. They have described the firms it invests in ominously as "CIA-backed," as if they were phony companies serving as cover for spy capers.

But in interviews with more than a dozen current and former CIA officials, congressional aides, venture capitalists that have worked with it and executives who have benefited from it, no one disputed that what began as an experiment in transferring private-sector technology into the CIA is working as intended. The Army, NASA and other intelligence and defense agencies have, or are planning, their own "venture capital" efforts based on the In-Q-Tel model.

"On a scale from one to 10, I would give it an 11," said A.B. "Buzzy" Krongard , the CIA's former No. 3 official and a former investment banker. "It's done so well even Congress is taking credit for it."

Yet In-Q-Tel remains an experiment that even its most ardent backers say has yet to prove its full potential.

"In my view the organization has been far more successful than I dreamed it would be," said Norman R. Augustine , who was recruited in 1998 by Krongard and George J. Tenet, who then was director of central intelligence, to help set up In-Q-Tel. Augustine, former chief executive of defense giant Lockheed Martin, is an In-Q-Tel trustee. "But my view is also that it's still an unproved experiment."

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