Date: Wed, 2 Jan 2002 01:26:33 EST From: freemanaz@aol.com Subject: [azpeace] CIA Bankrolls Start-Ups to Aid Anti-Terror Fight To: azpeace@yahoogroups.com Cc: jsharpe@ktar.com Reply-To: azpeace@yahoogroups.com
Subj: CIA Bankrolls Start-Ups to Aid Anti-Terror Fight Date: 1/1/02 11:24:10 PM US Mountain Standard Time From: freematt@coil.com (Matthew Gaylor) To: freematt@coil.com (Matthew Gaylor)
< http://www.iht.com/articles/43386.html >
CIA Bankrolls Start-Ups to Aid Anti-Terror Fight
Amy Cortese New York Times Service Monday, December 31, 2001
It may be quiet these days in Silicon Valley, but don't tell that to Gilman Louie, chief executive of In-Q-Tel, a private, nonprofit venture capital company set up and financed by the CIA in late 1999 to get a better bead on innovative technology that the intelligence crowd might put to use.
Since Sept. 11, Mr. Louie's staff has fielded calls from more than 400 companies - more than four times the normal volume for a three-month priod. The terrorist attacks on New York and Washington have sparked new interest in technologies from software that can identify faces on a video to applications that can analyze vast volumes of data, such as e-mail, for suspicious activity. Almost one-third of the companies in which In-Q-Tel has invested deal with managing and analyzing databases.
At the invitation of International Business Machines Corp., executives of In-Q-Tel visited the company's vaunted research labs and are now negotiating rights for the CIA to use some of its technology. In all, 60 companies, mainly start-ups, are on what In-Q-Tel calls a fast track for further investigation and possible investment.
Nestled on Sand Hill Road in Menlo Park, California, alongside several big Silicon Valley venture firms, In-Q-Tel has mainly been viewed as a curious government experiment in working with the private sector in new ways. But the attacks of Sept. 11 and the resulting anti-terrorism campaign have given it a new sense of purpose.
"This is no longer an experiment but a necessit," Mr. Louie said. "The government can't afford to build these technologies alone anymore."
In-Q-Tel is just one example of the government's new willingness to tap into the private sector for help in finding and quickly bringing to market the technologies with national security uses. For now at least, the old "skunk works," government-backed research operations owned by big military contractors, are giving way to a more open model that views the marketplace - particularly th start-ups financed by billions of venture capital dollars - as a sprawling research and development lab.
In October, the Defense Department issued a broad call for technology that could help fight terrorism, such as software that could predict terrorist actions and behavior by using remote sensor technology. By the end of November, the agency had received more than 700 submissions, and by the Dec. 23 deadline an estimated 12,085 had flooded in.
Recently, the army began considering the creation of a 50 million venture fund modeled after In-Q-Tel. And staff members from the Office of Homeland Defense and its Office of Cyberspace Security have been meeting with technology start-ups and research and development labs across the country.
"The government has really been reaching out and saying, 'These are the areas we are interested in,'" said Roger Novak, a partner at Novak Biddle, a venture firm in Bethesda, Maryland, that invests in early-stage companies. "What Sept. 11 has done is to mobilize government and industry in ways that I haven't before seen."
That is good news for cash-hungry start-ups with technology that can be applied to the military and national security. Many start-ups are realizing that, beyond providing financing, the government can also be a lucrative customer - especially when information-technology spending by corporations has all but dried up.
In the past, fledgling technology companies tended to avoid government work. They were unwilling to hitch their future to a single customer, especially a slow-moving one synonymous with red tape. Now, many are pursuing new military or related uses for their technology.
"The needs of the federal government are not that much different from a private company, but they need it today, and they're willing to spend money on it," Mr. Louie said. He figures that 80 percent of the companies that In-Q-Tel has backed had never before dealt with the federal government.
On the financing side, it has no doubt helped that the traditional venture capital industry, which has been focused on salvaging existing investments since the dot-com bust and the near-closing of the capital markets to initial stock offerings, has had a relatively inactive year.
VentureOne, a venture capital research firm, counts just 26 investments in security-related companies in the third quarter out of a total of 161 investments in software companies. Preliminary data for the fourth quarter show just 19 security-related deals. But venture capitalists say that is changing.
Most venture firms will not be rushing into areas outside teir expertise or into companies that do not have long-term growth prospects - they learned that much from the dot-com bust. But it is increasingly clear that there are opportunities for companies making a broad range of technologies that fall loosely under the security banner.
Much of this technology is not new. Companies that provide encryption technology, firewall software, anti-virus programs and biometrics - identifying individuals based on unique characteristics such as handprints or facial features - have been backed by venture capitalists for years. But new twists on old ideas are needed to keep up in the race against terrorism.
Perhaps the area of greatest interest, for law enforcement and investors alike, is technology that can help analyze vast volumes of data and detect unseen patterns or abnormalities. Called data-mining or knowledge management, it has a wide range of applications, from preventing credit card fraud to sifting through FBI data.
Seven of the 22 companies in which In-Q-Tel has invested are working on problems of managing large volumes of data.
Distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. ---
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