[118482] in Cypherpunks
IP: C.I.A. to Nurture Companies Dealing in High Technology
daemon@ATHENA.MIT.EDU (Robert Hettinga)
Wed Sep 29 15:16:52 1999
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Date: Wed, 29 Sep 1999 14:37:02 -0400
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Date: Wed, 29 Sep 1999 09:38:20 -0500
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Subject: IP: C.I.A. to Nurture Companies Dealing in High Technology
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Source: New York Times
http://www.nytimes.com/library/tech/99/09/biztech/articles/29cia.html
September 29, 1999
C.I.A. to Nurture Companies Dealing in High Technology
By JOHN MARKOFF
PALO ALTO, Calif. -- Hoping to insure that the nation's spies have the
latest information technology in the rapidly changing Internet age, the
Central Intelligence Agency has established a venture capital company to
nurture high-tech companies, company executives and former C.I.A. officials
said.
The C.I.A. has chosen a veteran Silicon Valley software executive to head
the effort, which has an office in Washington with eight employees and will
have a second office in Silicon Valley.
With a nod to nostalgia for the mythic gadget-laden spycraft of the James
Bond era, the agency has named its new nonprofit venture In-Q-It, in a
reference to Major Boothroyd, a.k.a. Q, the master technologist whose
basement laboratory develops advanced gadgets for the fictional British
super-agent. It will be headed by Gilman Louie, an executive in the Hasbro
toy company's online business group.
----------
Keeping America's spies up-to-date in the age of the Internet.
----------
The decision by the nation's spy agency to turn to Silicon Valley for
technology assistance underscores the growing diversity of high-tech
companies and the accelerated development of computer technologies. Unlike
in the cold war, when the most advanced technologies trickled down from a
handful of supercomputer companies, the most powerful technologies are
increasingly being developed first by consumer electronics companies that
now have vast markets to finance the developments of powerful systems and
applications.
In-Q-It is being financed with $28 million appropriated last year by
Congress as part of the C.I.A.'s budget, which is classified. The company
will seek joint projects and investments in crucial technology areas.
"There is a tremendous information explosion today," said John McMahon,
former deputy director of the C.I.A. and an In-Q-It board member. "As a
result, the agency was always one step behind. The agency got the idea that
maybe what it needed was something that would not only appreciate its needs
but be an umbilical cord that was plugged in to the brightest minds in the
Valley."
Louie said Tuesday that the purpose of the new company would be to move
information technology to the agency more quickly than traditional
Government procurement processes allow. The agency, he said, was struggling
with many of the same aspects of the Internet that are vexing to other Web
surfers, including privacy and security.
"The current model isn't working," Louie said. "The technology world has
totally changed, and one day the C.I.A. woke up and realized they needed to
go through the same change."
The new company will supply venture capital in some cases, and in others
it will hire contractors or partner with entrepreneurs in four areas:
integrating Internet technology and applications into the C.I.A.'s work;
developing new security and privacy technologies; nurturing data mining
technologies to take better advantage of the agency's vast storehouses of
records, and modernizing the agency's computer systems.
Louie said that none of In-Q-It's work would be classified and that the
organization would not be limited to the four areas he outlined. In
contrast to many of its other activities, he said, the agency was taking
pains to make the activities of In-Q-It highly visible and public.
That stands in striking contrast to the agency's past approach to
high-tech projects.
For many years there have been reports that the United States intelligence
community created shell companies when it had a particular high-technology
problem to solve.
Indeed, the C.I.A. worked secretly with Howard Hughes during the 1970's
when it needed to develop specialized salvage technology to retrieve a
sunken Soviet nuclear submarine in the Pacific Ocean.
While In-Q-It will operate on a nonprofit basis, Louie said his intention
was to invest in such a way as to make the organization self-sustaining.
Jeffrey H. Smith, the new company's legal counsel and former general
counsel to the C.I.A., said, "The Government will have the opportunity to
use the intellectual property developed by In-Q-It for Governmental
purposes, but In-Q-It will own and have the ability to use the technology
it develops for commercial purposes."
Louie said that while this was not the first effort to find innovative
ways to move new technologies quickly to the Government's needs, he
believed it was the first time a Government agency had adopted a venture
financing effort that mimicked a private sector model.
Venture capitalists said Tuesday that the problem the C.I.A. faces is a
challenge faced every day by large organizations: attempting to keep up
with the nimble pace of the Valley's technology start-up companies.
A number of large multinational companies have in recent years set up
investment funds in the valley in an effort to tap into the entrepreneurial
spirit of the region.
"There are a number of models on which the jury is still out," said James
Breyer, managing partner of Accel Partners, a venture firm in Palo Alto,
Calif.
Companies like Lucent Technologies and the AT&T Corporation have become
venture investors in the valley in recent years, he noted, and SRI Research
International had less success in trying to spin out its research projects
with an internal venture arm.
"The most important aspect is to have an outstanding outside management
effort overseeing the process," he said. "It appears in this effort the
C.I.A. has chosen well."
Previous Government efforts at financing technology have been highly
focused efforts to promote the development of specific technologies either
needed to keep the nation competitive or to meet national security needs.
For example, during the 1970's through 90's various military research
agencies like the Defense Advanced Research Projects agency and the Office
of Naval Research financed academic and corporate projects not as
investments but as contract research.
In the early 1990's, the Government financed the Sematech computer
consortium in an effort to maintain an independent semiconductor equipment
industry in the United States, which was being threatened by Japanese and
European competitors.
Louie, 39, said Tuesday that he would work on both coasts and was now
looking for an office in Silicon Valley. He said he had become involved in
the new company after meeting a headhunter from Heidrick & Struggles at a
mock-aerial dogfighting contest this year.
Louie is a lifelong computer gaming aficionado who a year ago sold his
computer gaming company, Microprose, to Hasbro. He has been a widely known
figure in the Silicon Valley software world since creating his first
computer gaming company while he was a student at San Francisco State
University in the early 1980's.
Among the new company's board members are John Seeley Brown, director the
Xerox Corporation's Palo Alto Research Center; Lee Ault, director of
Equifax Alex Brown; Stephen Friedman of Goldman Sachs; Norm Augustine,
chairman of Lockheed Martin, and William Perry, former Secretary of Defense.
Copyright 1999 The New York Times Company
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Robert A. Hettinga <mailto: rah@ibuc.com>
The Internet Bearer Underwriting Corporation <http://www.ibuc.com/>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'
