In-Q-Tel, the Central Intelligence Agency-sponsored venture arm, is proof that not all US government programmes are bogged down by bureaucracy and red tape. The CIA VC group has scored such investment wins as Keyhole Corp., which was acquired by Google in 2004, and SRD, an information management outfit that IBM bought earlier this year.
The chief aim of the group is to take technologies that can be used commercially and bridge those capabilities into something that the government can also use. Actual commercial success is important as well, but In-Q-Tel is more interested in the technologies harvested as opposed to profits, as all proceeds are simply returned back into the investment pool.
When In-Q-Tel was launched, Gilman Louie, who heads the group, described the government’s technology needs and those of the commercial world as very much aligned. He did note, though, that there are key differences. “Many of the Agency’s challenges are similar to what other major enterprises are facing today as they try to leverage the next technology wave,” Louie said in a statement. “The major difference between the commercial world and the CIA is the cost of failure, which, unlike business, cannot be measured in dollars. The Agency can’t afford to put its work on hold for a quarter to retool.”
In-Q-Tel’s investments range from seemingly benign, typical VC-type bets, such as nanotechnology, clean energy or wireless networking, to things that one would expect from the CIA’s VC arm, such as an investment in Ionatron, an electrostatic-discharge weapons maker (i.e., a company developing laser-guided lightning-bolt cannons).
A typical In-Q-Tel investment is between $1 million and $3 million in size, and the group will work with startups, established companies, universities and research labs at a strategic level. Since launching, In-Q-Tel has evaluated more than 4,000 proposals, and made more than 50 investments in those companies, so even if the group doesn’t make an investment, it probably has a pretty good idea of other technologies being developed.
While there are isn’t any performance data that can quantify In-Q-Tel’s success, the fact that other government agencies are following in the CIA’s footsteps would seem to indicate that the programme is paying dividends. The Wall Street Journal reported two months ago that the Federal Bureau of Investigation and the Defence Intelligence Agency will start appropriating funds into In-Q-Tel, while the US Army and the National Aeronautics and Space Administration (NASA) have also outlined plans to establish similar government sponsored VC groups.