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American City Business Journal
November 9, 2001
CIA venture fund gets lots of activity
Lizette Wilson
SAN FRANCISCO -- The war on terrorism has venture capitalists rushing to
enlist in Uncle Sam's VC army, says the chief executive officer of a venture
firm bankrolled by the CIA.
In-Q-Tel, which has doled out $100 million to 20 startups since 1999, is
continuing to seek companies that can help government officials pull
electronic data from e-mails and Web sites to boost national security.
Meanwhile, it's fielding calls from top-line VCs, offering both to open
their portfolios to In-Q-Tel investment and to help sift through
opportunities.
"The mood is one of purpose now. There's no debate about why we're here or
what the time frame for implementation is since Sept. 11 - it's urgent,"
says In-Q-Tel Chief Executive Officer Gilman Louie. "These technologies are
not a luxury; they're a need-to-have. The CIA can't afford to have second
best."
While there's been no budget increase to the government VC fund since last
month - it is slated to receive $30 million again this year - activities
have increased to nurture firms that provide technology the CIA needs.
Technology that enables searches across public and private databases,
self-protecting data, geospatial information services such as location
extraction, threat detection of malicious code breaks and a wide range of
information management technologies are all currently being funded by
In-Q-Tel.
Inquiries to In-Q-Tel, which has offices in Menlo Park and Arlington, Va.,
have increased fourfold since the attacks to about 50 a week. This includes
entrepreneurs and startups that "are coming out of the woodwork," as well as
high-level VCs who are offering to help In-Q-Tel cull top technologies, says
Louie.
Louie says he's had conversations with Allen Morgan from the Mayfield Fund,
Stewart Alsop of New Enterprise Associates and Floyd Kvamme and Brook Byers,
both at Kleiner Perkins Caufield Byers, about working with their companies'
existing portfolio members as well as the role they can play scouting for
new companies to help the government better track terrorism threats.
"You look historically and the Valley has played a pretty major role in
building up the defense establishment. But that kind of went away because we
didn't have any wars, thank God. Well, now we're at war," says Kvamme.
"(Sept. 11) happens, and call it national loyalty or something, and people
have ideas about ways to use the technology we have. So I've been passing
that along."
While government interest may be welcome for companies struggling to find
funds, great technology may not translate into success for the federal
government.
The demands of the intelligence world make transferring technology from
concept to implementation difficult, according to a report by Business
Executives for National Security published in June 2001.
The nonpartisan group of senior business executives have been advising the
Pentagon, Congress and the White House on national security challenges since
1982.
One problem, according to the group's report, is the multiple security
levels that technology and its creators must pass through to be included in
CIA operations.
"All code has to be U.S.-developed. No foreign line code is allowed, and
India does a lot of code writing for a lot of software, so that makes it
tough," says Paul Taibl, an author of the report. "The CIA has the spies and
the technology types that develop gizmos and, of course, the analysts. Even
though they may be working on the same (project), they are insulated from
each other. That's part of security, but it creates independent fiefdoms
which are hugely inefficient to coordinate."
Louie says compiling those disparate chunks of information and getting them
to the correct agency personnel is a major focus of In-Q-Tel.
And, he says, they've got the money to do it. "Increasing our budget has
never been a problem. If we need more (money), we can go back for more."
Wilson is a reporter for the San Francisco Business Times, a sister
publication.
Copyright 2001 American City Business Journal s Inc.
Click for permission to reprint (PRC# 1.1667.505935)
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