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Security & Privacy Startup Culture

By Kevin Maney | June 13, 2013, 9:54 AM | Techonomy Exclusive

In 2004, while working for USA Today, then based in part of an Arlington, Va., office tower, I wanted to do a story about the CIA’s then-experimental venture capital unit called In-Q-Tel. I got the OK from In-Q-Tel to visit its office. But the CIA was so concerned about secrecy and terrorism, I had to agree to not reveal where the office was located. So I met a man on the ground floor of an office tower that had once housed USA Today, and he promptly took me back up the elevator. In-Q-Tel’s office was in the same building. I may be one of the only journalists to go there.

In-Q-Tel has since moved down the street. You can find its address on the Web—though not on its own web site. And now that the National Security Agency’s PRISM data-collection system has been outed, In-Q-Tel is more visible than it’s ever been.

That’s because In-Q-Tel has most likely been a key factor in creating the super-data-crunching technology behind PRISM. The actual technology has not been revealed. But the best bet is that it didn’t come from some classified government lab hidden in a mountain—it came from companies started by American entrepreneurs who were funded by In-Q-Tel.

It’s also quite likely that these companies don’t even know how the U.S. intelligence community is using their technology. The companies make commercial products, and most of their customers are banks, hedge funds, pharmaceutical companies, marketers. The CIA or NSA might make a purchase, then pull down the curtain. When I did the 2004 story, I spoke with John Laing, then CEO of Inxight, a data-retrieval company funded by In-Q-Tel. He claimed to have no idea what the CIA did with his stuff—and, for that matter, he refused to utter the acronym CIA. “We can surmise they must like our product because they keep ordering more,” he said.

Consider, though, the case of Palantir Technologies, one of the most successful companies In-Q-Tel helped fund. Founded in 2004 by some PayPal alumni, including Peter Thiel, Palantir makes software that can suck enormous amounts of information from many different kinds of databases and look for patterns. Which is just what’s going on in NSA’s PRISM program. Oh, and Palantir’s software platform that does this is actually called Prism.

Palantir has been denying a connection between Prism and PRISM. But then again, Palantir might not have any idea. It’s a good bet U.S. intelligence is a customer. The CIA didn’t bet $2 million on Palantir on a whim.

That said, In-Q-Tel has turned out to be a brilliant mechanism for creating intelligence technology, allowing the government to tap the inventiveness and ambition of American entrepreneurs without getting in the way.

It got its start in a 1998 meeting between then-CIA Director George Tenet, CIA Executive Director Buzzy Krongard, and Norm Augustine, who had built Lockheed Martin. Tenet told the group that the Internet boom poured so much money into tech startups, the startups leapt ahead of the CIA’s technology. Tech companies didn’t know what the CIA might need, and the CIA had no idea what the tech companies were inventing.

Augustine, Tenet and Krongard—a former investment banker—came up with the idea of creating a semi-autonomous VC arm. To lead this new entity, the CIA hired Gilman Louie, who oddly enough was then head of Hasbro’s video game unit. He had also designed a popular flight simulation game, Falcon F-16.

In-Q-Tel has an ingenious way to keep secrets secret while dealing with entrepreneurs. Most of its employees don’t have security clearances. Inside the CIA is a separate group of agents who tell In-Q-Tel what kinds of technology the CIA needs. In turn, when In-Q-Tel funds an interesting start-up, it tells the agents, who can introduce the technology around the CIA.

Tech entrepreneurs were at first wary of In-Q-Tel, but after 9/11, the business plans started pouring in. In-Q-Tel has now pumped hundreds of millions of dollars into about 200 early-stage tech companies. It’s had a good hit rate—many successes, a number of companies (including Inxight) that were acquired, and a bunch of fascinating portfolio companies.

Besides Palantir, In-Q-Tel’s portfolio today includes Basis Technology, which can automatically translate and look for patterns in text in dozens of languages, and Oculis Labs, which makes software that lets your webcam look behind you to see if anyone is trying to view your computer screen. Sonitus Medical is working on tiny wireless communication devices that could be hidden inside a person’s mouth.

In-Q-Tel has even invested in D-Wave Systems, a controversial company pursuing quantum computing. If D-Wave actually makes that technology work, the CIA and NSA could have access to computing power that would make PRISM’s technology-—whatever it is-—look innocent in comparison.