- The Washington Times - Tuesday, January 22, 2002

Gilman Louie is not on the lookout for companies that make exploding pens, but he is trying to help the government's leading intelligence agency find useful technology.

Mr. Louie heads In-Q-Tel Inc., which was founded about two years ago as the nonprofit venture-capital arm of the Central Intelligence Agency.

In-Q-Tel gives young, cash-starved tech companies money for operations, research and development. In turn, the companies develop software and other high-tech equipment that can help the highly secretive agency improve its computer systems and support intelligence efforts.

"There is this huge amount of activity happening beyond the Beltway, technologies being developed by entrepreneurs for the commercial sector, and we weren't tapping into that energy," said Mr. Louie, a 41-year-old former video-game engineer who has served as In-Q-Tel's chief executive since it started.

In-Q-Tel gets $30 million a year from the CIA for operations and to invest in tech companies. So far, it has spent about $60 million and taken an equity stake in about 20 start-up technology firms, investing from $750,000 to $3 million in each.

Interest in the CIA-funded group has been enormous. Since starting, nearly 1,500 companies have contacted In-Q-Tel, which gets the "Q" from the James Bond character who develops gadgets for the fictional spy.

The CIA's decision to start a venture-capital company raised eyebrows in 1999 because In-Q-Tel planned to compete with the private sector. Criticism faded when venture-capital firms realized how little In-Q-Tel would invest annually. Now the government's decision to tap into the private sector seems like a good idea, said Paul Taibl, assistant vice president for policy at the Business Executives for National Security, an independent policy group in the District that examined the venture firm last year for Congress.

In-Q-Tel commonly teams with private-sector venture-capital firms to find and fund technology start-ups.

Now the Army is considering starting a venture-capital arm modeled after In-Q-Tel.

The idea makes even more sense in light of the terrorist attacks of September 11, Mr. Taibl said.

"Having the venture-capital model in place gave them a head start on finding technology that can be useful for counterterrorism measures," he said.

In-Q-Tel is placing more emphasis since September 11 on finding companies that develop knowledge-management software, which could help the agency cull through vast amounts of data to aid investigations, Mr. Louie said. In-Q-Tel invested $1 million last year in Mohomine Inc., a San Diego company whose software sorts through and categorizes information from a range of documents, including those written in foreign languages.

In-Q-Tel got its start by searching for tech companies with more mundane applications, like software that improves information technology. That's because In-Q-Tel supports development of technologies that will be useful to the CIA and to private-sector companies.

In-Q-Tel invests in companies that develop products to help Web users surf and search for data more efficiently, improve the security of information stored on computers and make the Internet safer by eliminating the potential for viruses and other potentially damaging attacks on a computer system.

"We exist to make the intelligence process more efficient and more productive. There are a lot of cool technologies out there. But the most important thing is the unsexy stuff," Mr. Louie said.

Browse3D Corp. was one of the first companies In-Q-Tel invested in. The Chantilly company got $1 million in June 2000, when it was still developing its software. Browse3D's software is intended to improve Microsoft Corp.'s Internet Explorer browser by letting people surf the Internet while viewing the last page viewed and pages that could be viewed next, all at the same time.

In-Q-Tel also invested $1 million in July in Tacit Knowledge Systems Inc., a Palo Alto, Calif., company with software that funnels information in corporate databases to people within a company who may need the data for research or other reasons.

Both companies benefit from their relationship with the CIA because the agency provides them a high-profile customer.

"The main thing is, the CIA is a fairly sophisticated customer," said Dave Shuping, the 41-year-old founder and chief executive of Browse3D Corp. who runs the company from his home.

The CIA has used Browse3D's software since August, Mr. Shuping said, and the company was set to release this commercially this week.

But there are few examples of the CIA using the technology produced by companies it invests in. One criticism of In-Q-Tel, Mr. Taibl said, is that technology from the companies it gives money to is not widely available throughout the CIA. There were just three pilot projects under way to test products of In-Q-Tel-backed companies when the Business Executives for National Security completed its report last June.

"We don't talk about the actual use of the technology, other than to say these are technologies the intelligence community and the commercial world are both interested in. But there are some," Mr. Louie said.

Mr. Shuping and Tacit Chief Executive Officer David Gilmour have no complaints. There is a certain cachet gained in dealing with In-Q-Tel because of its CIA roots, Mr. Gilmour said.

The only evidence In-Q-Tel is run differently is that it keeps the location of its offices in Arlington and Menlo Park, Calif., secret. The company is not listed on the directory of the Arlington office building it occupies. But the CIA connection doesn't make dealing with In-Q-Tel different than dealing with any other company, Mr. Gilmour said.

"They don't really seem that different from other investors," he said. "The fact is that it's very conventional. We don't have secret meetings."

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