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Spy vs. Spy


CIA's Venture Capital Firm


Follow the investments.

WASHINGTON -- Christopher Tucker is an unlikely spook.
Just 27, outfitted with a disarming grin, a blue Oxford shirt, and a
houndstooth jacket, Tucker looks more like the Ivy League graduate student he
recently was than the chief strategist of the Central Intelligence Agency's
venture capital arm.

The name of the CIA-chartered, nonprofit firm -- In-Q-Tel -- evokes James
Bond imagery. Its offices even boast a signed photo of the late actor Desmond
Llewelyn, who played gadgetry expert Q in the films.

But Tucker says the technologies In-Q-Tel considers potential investments are
far less exciting than anything Bond would ever use. No exploding watches,
rocket-equipped BMWs, or booby-trapped suitcases. "Our job is defense. We
don't touch offense," Tucker said.

Even in the clandestine world of the nation's intelligence agencies,
defending sensitive information against interception by determined
adversaries starts to look a lot like the problems businesses face every day.

"If I'm (a CIA agent) in my hotel room, I need to be able to do my work,"
said Tucker.
What that translates into is In-Q-Tel's plan to invest largely in software
technologies such as computer security, anonymity and privacy; tamperproof
data storage; and clever search engines that return results based on the
authorization level of the person requesting the information.
But that's just for now.

The true mission of In-Q-Tel, which opened its doors last year and has
offices in Washington, D.C. and Silicon Valley, is even more ambitious: To
tap the best minds in the technology sector and spur the development of
products the CIA desperately needs and doesn't have the time or expertise to
develop itself.

"The CIA is not a technology company. It is an espionage company. It does not
develop products," said Tucker, who completed a PhD in political science at
Columbia University. If In-Q-Tel succeeds, other agencies of the U.S.
government are likely to follow suit.

The Defense Department, for instance, appears particularly interested in the
CIA's spin-off-a-nonprofit-corporation approach to applied research.

But In-Q-Tel is hampered by one seemingly insurmountable obstacle: its
budget.

Congress appropriated $28 million from the CIA's 1999 budget to create the
organization, then deposited an extra $34 million in the fledgling In-Q-Tel's
bank account.

That's not a trivial amount -- except in the high-priced world of venture
capital. Venture capitalists spent approximately $19.6 billion on about 1,400
U.S. companies in the second quarter of 2000, $7 billion of that going to
firms in the Bay Area alone.

In-Q-Tel hopes to spur development of CIA "priority" technologies by becoming
a minority investor in development deals and through close relationships with
much larger firms, like Kleiner, Perkins, Caufield, and Byers.

"The deal flow's actually key to this, and key to extending the agency's
reach," Tucker says. "We want to be a minority investor in a company. We
would also like not to be the lead investor. We stay below 20 percent,
somewhere like that." Key to staying in the deal flow is connections,
something that In-Q-Tel hopes CEO Gilman Louie can provide. Louie, a
game-designer-turned-executive, is a veteran of companies such as Spectrum
HoloByte and Hasbro Interactive.

Connections inside the hacker community also help. In-Q-Tel counts a "white
hat" hacker among its roughly 30 staff members -- the bulk are in suburban
Virginia, not far from the CIA's Langley headquarters -- and took the bold
step of sending recruiters to the Defcon party-cum-convention this year.
About seven employees work out of In-Q-Tel's Palo Alto, California, office.

Only about 10 employees have security clearances, some rated "top secret"
with codeword access. But it's a sure bet that the 10 or so CIA employees
working at what's called the In-Q-Tel Interface Center inside Langley do.

The center has the unenviable job of making sure the technology In-Q-Tel
finds and funds is adopted by the so-called power users inside the agency.

Although some Silicon Valley types fret that the CIA has come to town to spy
-- with good reason, given the federal government's history of pressuring
firms to include backdoors in security and telecommunications products --
In-Q-Tel seems to have made a fair attempt to put such concerns behind it, at
least for now.

It's invested $1.2 million in Graviton, a San Diego startup that's developing
"micro-electromechanical systems" -- aka tiny, smart sensors that can be used
to record and transmit information wirelessly. And Science Applications
International Corp., which has close ties to the spook community, got $3
million in In-Q-Tel cash to develop a product called Neteraser.

Neteraser is reportedly designed to help CIA agents conceal their telltale
domain names while browsing the Internet. (It could be useful: Archivist John
Young, for instance, says that what appears to be a National Security Agency
robot stops by his website every morning.)

And if the technology has lucrative commercial spin-offs, so what? "One of
the biggest emerging markets in the Internet space is a desire for privacy,"
Tucker says. "I'm not even that technical, and I can hunt you down like a
dog."

Additional areas of interest include what In-Q-Tel describes as working
toward real-time, collaborative use of databases ranging from terabytes
(1,024 gigabytes) to petabytes (1 million megabytes) in size.

Still other concentrations include intelligent personalization,
self-protected data that detects tampering, advanced virus and intrusion
protection, and smart mapping techniques.

Says Tucker: "The agency and In-Q-Tel have a sophisticated understanding of
the problem."
Wired News, October 19, 2000
-----
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