CIA Incubator Technologies Ready for Active Duty

Agency Leads in Development, But Can It Follow Its Own Charter?<@VM>For VCs, Not the Best of Times, But Not the Worst of Times

What the CIA Needs

Each year, the In-Q-Tel Interface Center generates a list of the Central Intelligence Agency's most pressing information technology-related challenges. CIA technology leaders, service providers and other users are interviewed, and the information is assessed and compiled into "problem sets." The sets are reviewed by a panel of interdirectorate experts and, afterward, the agency executive board.
The most recent list, compiled in March, placed CIA IT needs into two categories: dependent problems, which require end-to-end support for mission areas; and standalone problems, which occur within a single mission area.

Dependent Problem Areas: Analytic Foundations: Technologies that support data analysis, including hardware architecture, indexing software, tools for integrating multiple search technologies and visualization techniques. These solutions should work with the CIA's existing portal projects.
Secure Mobile Office: Technologies for secure mobile computing, including robust authentication, protection against tampering with a stolen laptop or handheld device and security for wireless transmissions.
Web Discovery: Technologies to more fully use information on the Internet, including foreign language support, a Web directory, archiving, security and deep-searching capabilities.

Standalone Problem Areas: Internet Privacy: Tools to protect the identities of people, the organization and corporate interest areas online.
Business to Web: Tools to streamline legacy migration to Internet and intranet-based systems.
Collection Tasking: Automated matching and tracking software for information that has been gathered.
Collection Technology: Commercial information collection technologies that would work well with the CIA's needs.
Secure Network: Security assurance and trusted gateway tools as well as watermarking, auditing and non-repudiation technologies.

In-Q-Tel Inc., the Central Intelligence Agency's venture capital arm, has invested $30 million over the past two years in companies with promising technologies.

But while these companies attract the attention of other government agencies, the CIA itself is struggling to adopt technology from outsiders, according to a Congress-initiated report from the Business Executives for National Security, a not-for-profit organization of business leaders.

"In many ways, In-Q-Tel is a pioneering effort by the CIA and Congress to accelerate acquisition and integration of new technologies for intelligence," said C. Lawrence Meador, a Boston entrepreneur who headed the panel that produced the report, released Aug. 7.

"There are some management challenges that need to be addressed before In-Q-Tel is a total success, but this enterprise is off to an impressive start," Meador said in a press release announcing the report.

The CIA created In-Q-Tel in 1999 with a five-year charter to introduce new technologies into the agency, after recognizing that it was struggling to keep up with the explosive growth of information technologies.

"In-Q-Tel is a shopper in well-defined technology spaces," Gilman Louie, In-Q-Tel's president and chief executive officer, said to Washington Technology.

Like a venture capital firm, In-Q-Tel invests in individual, pre-initial public offering companies. But instead of grooming companies for particularly fruitful markets, In-Q-Tel focuses on those companies with technologies addressing the CIA's needs in secure mobile data communications, privacy, security, legacy migration, data management and other fields.

The companies that best meet these needs, In-Q-Tel found, are often ahead of the curve technologically but only on the cusp of commercialization. By investing in them, the CIA assures the technologies it needs will be available.

Thus far, In-Q-Tel has received more than 750 proposals, has spent more than $30 million in 16 investments in companies and technologies and has installed three pilot programs. According to the report, other intelligence agencies are considering the In-Q-Tel model as well.

But while In-Q-Tel's investments bring new products to market, the business executives panel found the process of inserting that technology into the CIA itself is "extremely complicated and time consuming," the report said.

For example, new hardware or software to be used in a classified environment needs to be reviewed by six boards and undergo 136 associated process steps to ensure security, counterintelligence safeguards, agency engineering, records management, installation support and integrated logistics support.

Plus, the panel found that, while In-Q-Tel received support at high levels of the CIA, there was more reluctance at lower levels to accept technology not developed in-house.

To better facilitate the use of funded technologies, In-Q-Tel will work closely with those writing the requests for proposals for contracts so they "make bidders aware of the technologies CIA has developed," Louie said.

"A lot of the work will hopefully go through systems integration, especially through the use of pilot programs," he said.

Yet mandatory support for CIA-developed technologies won't be inserted into contracts, he said.

"Writing an RFP is an art. We won't say use such-and-such a solution, or even define what is needed, but rather we'll define the problem," he said. "You don't want to write yourself out of other, better solutions. If you do that, you're not drawing enough on the integrator."

The technologies that In-Q-Tel found the CIA needed most were those dealing with data management. "Specifically, how to get out from under the crushing load of information," Louie said. "A lot of times, when someone requests information on a particular subject, it can take days to complete. It's an intensely manual process. It takes armies of people working through mounds of data.

"So anything that can undercut that information overload we were interested in," Louie said.

To this end, In-Q-Tel invested $9.4 million in Cincinnati-based Intelliseek Inc., which develops enterprise-level applications for automating data aggregation.

Other investments of undisclosed amounts have gone to:

? Mohomine Inc. of San Diego, which specializes in tools that convert unstructured data, such as e-mail and word processing documents, into relational databases so they can be classified and searched; and

? SRA International Inc. of Fairfax Va., which was paid to optimize its NetOwl text-mining technology to support information retrieval for daily briefings of world events.

According to Dave Conetsco, deputy director of intelligence programs at SRA, the tools SRA developed for the CIA can bring SRA competitive advantages when bidding on other agency contracts.

Like SRA, other companies are hoping that working for the CIA will open doors to relationships with other agencies. And most are actively seeking partnerships or are directly approaching agencies themselves.

"We're really getting our feet wet through the CIA," said Stephen Hsu, co-founder, president and chief executive officer of safeWeb Inc., Emeryville, Calif.

The security and privacy software company has secured no previous major government contracts. Yet Hsu is confident that what safeWeb products CIA deploys will be closely inspected by other intelligence agencies as well.

SafeWeb received a $1 million investment from In-Q-Tel, with $250,000 going for a license for its Triangle Boy software and $750,000 being invested in the company itself.

Triangle Boy obscures the true Internet protocol addresses of given Web sites. Hsu said this software is good not only for avoiding the denial-of-service hacker attacks so common lately, but also in ensuring constant up-time for mission-critical Web sites by spreading out the sites over a series of Internet protocol address numbers.

The CIA is also looking at other safeWeb technologies for anonymous Web surfing and data tracking. The data-tracking element, Hsu said, would be good for use as a privacy control with systems that need to comply with the Health Insurance Portability and Accountability Act.

Another company eyeing the HIPAA market for its In-Q-Tel-funded products is MediaSnap, San Jose, Calif., which received $1.25 million. MediaSnap offers advanced digital rights management tools that can watermark, track and audit usage and set permissions on saving and forwarding of documents.

MediaSnap's products would work to ensure that health information could be passed remotely while being kept confidential, said MediaSnap CEO and president Kathy DeMartini.

The hope of securing more government work through the CIA's stamp of approval was also a motivation for Mohomine, said Neil Senturia, the company's CEO. Although Mohomine has already established a customer base, the government market has remained elusive for the company.

"We knew it was a good market but we didn't know how to get into it. It is Byzantine," Senturia said.While the CIA plows investment into technologies to combat its own case of data fatigue, what kinds of new infotech goodies will the venture capital community introduce in the coming months and years?

"We're seeing a lot of diversification," said Jeanne Metzger, vice president of business development and public affairs at the National Venture Capital Association, Arlington Va.

There is no field in particular that's a hot area. Gone, for now anyway, are the days when VCs flocked from one hot investment area to the next, from business-to-business to fiber-optic networking to wireless technologies.

According to Metzger, 80 percent of investments from VCs now is in portfolio management, leaving only 20 percent for new ventures.

Certainly, however, the old standbys, Internet-enabled software and e-commerce tools, are still attractive, Metzger said.

For instance, earlier this month, Kontiki Inc. of Mountain View, Calif., made its debut. This company created secure media delivery network tools for Internet delivery of digital video, audio, images and software. Kontiki received $18 million in funding from venture capitalists Benchmark Capital and the Barksdale Group, both of Menlo Park, Calif.

Benchmark also scored a victory when a company it backed, AuroraNetics, was purchased in July by Cisco Systems Inc., for up to $150 million. AuroraNetics is a developer of data-optimized fiber rings for 10 gigabits per second-capable metropolitan fiber networks.

Part of what is happening, Metzger said, is a return to normalcy after the past few years of unsustainable growth for the VC community. She said today's funding pattern is on the scale of what was the norm in 1999.

"These are not the best of times, but they're not the worst of times either," Metzger said.

About the Author

Joab Jackson is the senior technology editor for Government Computer News.

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