CIA funds not-so-secret investment operation
The CIA provides In-Q-Tel, a nonprofit venture fund in Arlington, Va., with "several tens of millions of dollars a year," according to Mike Griffin, In-Q-Tel president and chief operating officer.
Created in 1999 to find new technologies for intelligence and espionage work, In-Q-Tel has invested in almost 50 companies, he said. It has a current portfolio of 33 active investments. Any profits are added to the fund and invested into other companies, he said. "While we've had some successful ventures that have returned money, so far it has been a relatively small amount," he added. "The typical business development period is three to seven years.
In-Q-Tel itself is only 4-and-a-half years old." The company's mission is to "go after the leading edge of high tech, which is generally represented by smaller, newer entrepreneurial companies," he said. "These companies are not well-positioned to market to government. They don't understand government procurement; they likely have not incorporated [Defense Contract Audit Agency] standards. By working with In-Q-Tel, we can match them up with at least part of government — the intelligence community — and give them some access to other parts of the government."
Since its inception, In-Q-Tel has received about 3,500 business plans from companies seeking funding, Griffin said. More than 2,700 of them have come in since the Sept. 11, 2001, terrorist attacks. The relationship with the CIA has proven valuable in channeling information to the nascent companies. In-Q-Tel has developed a partnership very much like the one that Anne Arundel County, Md., officials foresee for the Chesapeake Innovation Center and the National Security Agency.
"On a day-to-day working basis, there is a daily dialogue with our agency counterparts to define, to refine and to work with what we call our problem set, the broad outline of tasks the agency has that In-Q-Tel can address," Griffin said.
Unlike incubators and some investment firms, however, In-Q-Tel is looking for more mature funding opportunities. The CIA's needs and the company's success are twin priorities, he said.
"We're not looking for seed-stage companies," the youngest of the young, Griffin said. "They will typically be several years away from having a useful product. We're looking for companies [that] are going to be able to produce a product in six months on one side to maybe 24 months out on the other. We have done deals with seed-stage companies, and we have done deals with larger, established companies, but they're the exception. If an In-Q-Tel investment can bring value to the agency, we will do it."
Once the technology is available, In-Q-Tel will conduct a pilot program within the CIA, he said. Even if the agency buys the technology, however, the company is free to market it to other agencies or commercial customers.
"We don't want them building in anything that's just intended for the government," Griffin said. "That tends to leave an orphan product, and that doesn't contribute to a company's success."
The investment firm goes out of its way to find markets for technologies it funds, said Mahendra Vora, chairman and chief executive officer of Intelliseek Inc. The Cincinnati-based company develops software to find important information in mountains of unformatted text and discover relationships among seemingly unconnected bits of data.
"These people [at In-Q-Tel] are continuously talking to government organizations about what their needs are," he said. "When they say, 'Oh, you've got this problem, you must meet Intelliseek,' that cuts six months off the time it would take me. They're opening doors and giving us instant levels of credibility." Incubators and investors can offer leadership to a young firm, if it is willing to heed the advice, Griffin said.
"We're absolutely not passive," he said. "Once we've invested money into a company, we have a strong interest in seeing that company succeed."