CIA Looks to Venture Capital

[William Knowles <wk () C4I ORG>]

http://www.wired.com/news/business/0,1367,39468,00.html

by Declan McCullagh
2:00 a.m. Oct. 19, 2000 PDT

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."


*==============================================================*
"Communications without intelligence is noise;  Intelligence
without communications is irrelevant." Gen Alfred. M. Gray, USMC
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