CIA Enters the Private World of Venture Capital
Can the kind of out-of-the-box thinking that spawned the Internet one day help our spies do better snooping?
Betting that it can, the CIA has founded a venture-capital firm to seek out and nurture entrepreneurs whose ideas might lead to breakthroughs in intelligence gathering--and perhaps some nifty commercial products along the way.
The new firm--a private, nonprofit corporation called In-Q-It--has been operating for a month in Washington and plans to open an office in Silicon Valley.
The “Q” in the name is a nod to the avuncular gadget master of the James Bond spy series, whose went by that code name operate far more autonomously than an actual government agency, its founders say.
That’s the whole idea, in fact.
After all, it wasn’t just electrical engineering and electronic innovations that gave us the Internet; it also was something as seemingly mundane as the formation of a new research-and-development model for the U.S. military.
The Internet’s predecessor was created by the Defense Advanced Research Projects Agency (DARPA), the military’s top research laboratory, which itself was founded in response to the Soviets’ 1957 launch of Sputnik.
Realizing that a crash technology program on the scale of the space race could hardly thrive within the lumbering military bureaucracy, the founders designed DARPA to be small and nonbureaucratic so that it could attract scientists from university and business settings as well as from government.
That thinking, updated for the dot-com age, is what resulted in In-Q-It.
The new firm’s president and chief executive is Gilman G. Louie, former chairman of Hasbro Interactive, the big toy maker’s electronic game division.
Louie, who created a popular air-combat game for a previous employer, landed the In-Q-It job after meeting a corporate headhunter in a “Top Gun”-style simulated dogfight competition.
“The CIA needed faster solutions and access to better talent than it could otherwise get,” Louie said in a recent interview.
“At the major engineering and business schools now, there are three things that motivate top students: options, options and options,” Louie continued. “If all you have to offer is a Civil Service job, it’s hard to compete.”
Unable to transform 25-year-olds into stock-option multimillionaires the way that Internet IPOs can, the CIA decided to become an investor instead of just an employer.
In-Q-It will function as a “solutions broker” for the CIA, said Jody R. Westby, the firm’s chief administrative officer.
Normally, she said, when the government puts out an R&D; proposal, it produces a book-thick contract with reams of detailed specifications. Not only is such red tape daunting to small businesspeople, but it defines the task so tightly that innovative thinking is all but choked off.
Instead, the CIA will present In-Q-It with general problems expressed in a way that no classified information is disclosed--and, therefore, no security clearances will be required of the entrepreneurs who eventually work on the problems.
James Richardson, research vice president at the Potomac Institute, an Arlington, Va., think tank that studies military issues, said the main problem with any government procurement effort is that the risk-averse bureaucratic culture has “an extreme dampening effect on radical ideas.”
The In-Q-It model “seems like a very productive approach,” he said.
The problems that In-Q-It will tackle on the CIA’s behalf will fall into such categories as data security and “knowledge management,” Westby said.
The CIA confronts “global information inundation--as if huge semitrucks were pulling up every day and dumping masses of data on them in every form, from electronic to handwritten to photographic,” she said. “They’ve got to get that data in the right form to the user in an efficient way.”
She noted that the CIA, which was created in 1947, took as an initial motto “Never again”--a reaction to the devastating 1945 attack on Pearl Harbor, which caught the huge Navy base unprepared. “We had the information in the government, but we didn’t get it to the people who needed it in time,” Westby said.
National security is a laudable mission, of course, but as Louie implied, it isn’t necessarily Priority 1 among technology entrepreneurs.
That’s why In-Q-It is hoping that much of the research it finances will result in commercial spinoffs. Just as encryption and code-cracking software has obvious applications to espionage, it is also of use to banks and retailers.
If a project sponsored by In-Q-It results in a big payoff, the nonprofit firm will negotiate licensing rights with the inventor.
Most of In-Q-It’s investments likely will be in the $1-million to $3-million range, Louie said. He expects to have additional investing partners in some ventures.
In-Q-It’s board of trustees may help in that regard. It includes such well-known technology and venture-capital names as John Seely Brown, chief scientist at Xerox Corp. and president of Xerox PARC research center; Stephen Friedman, senior principal of Marsh & McLennan Capital Inc.; Paul Kaminski, CEO of Technovation; and Jeong Kim, president of Carrier Network, part of Lucent Technologies.
To date, In-Q-It hasn’t struck any deals, but it has been flooded with inquiries.
Asked whether anyone has shown hesitation to work with In-Q-It because of its relationship to the spy agency, Louie said the prevailing attitude tends more toward skepticism about whether the government can actually pull off something creative.
The Potomac Institute’s Richardson predicted that there will be resistance, but it won’t be because of any particular moral qualms about the CIA’s methods or mission.
“It will be for the same old reason: government bureaucracy,” he said.
In-Q-It’s Washington phone number is (202) 220-0220.
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Staff writer Thomas S. Mulligan can be reached by e-mail at thomas.mulligan@latimes.com.
