In-Q-Tel Opens Boston Office, Plans to In-q-bate New Technology for the Intelligence Community
If you’re a budding Boston entrepreneur working on a technology such as deeper data mining, longer-lasting batteries, or faster microfluidic DNA screening, you might get a surprise phone call one day soon from the U.S. intelligence community—or at least, from its strategic investing arm. That’s because In-Q-Tel, an Arlington, VA-based private, non-profit group that funds early-stage technology ventures on behalf of the Central Intelligence Agency and other U.S. intelligence organizations, has come to town. It’s just turned on the lights at its new Waltham office, and it’s on the lookout for Boston-area startups with technologies that could help the nation’s spies and intelligence analysts do their jobs better.
It’s not that Boston has eluded the intelligence agencies in the past—the region is already home to 13 out of the 120 companies In-Q-Tel has funded since its creation in 1999, including Basis Technology, BBN Technologies, Ember, Endeca, Metacarta, Polychromix, Sionex, Spotfire, and Traction Software. But Ben Levitan, a new partner brought on by In-Q-Tel this April to help open the Boston outpost, says “that percentage is about to go up a lot.”
Levitan agreed to meet me for coffee in a snowy Harvard Square yesterday afternoon. With him was Donald Tighe, In-Q-Tel’s vice president of external affairs, who was visiting from Virginia. I’d first met Levitan in an unusual setting—a dinner discussion about virtual items and virtual economies hosted back in October by David Beisel of Cambridge venture firm Venrock—and he’d hinted to me then that In-Q-Tel would have some news in the next few weeks. Over cappuccinos at Legal Sea Foods, Levitan and Tighe told me that the organization has been cultivating local contacts behind the scenes for some time, and that they’re now finally ready to start spreading the word more widely about In-Q-Tel’s presence here.
In-Q-Tel’s mission is to scout for young companies where engineers are working on technologies intelligence agencies might want, but need help getting these technologies off the ground and adapting them for the government’s specific requirements. The organization provides seed money of up to $3 million, as well as a crash course in the structure and requirements of organizations like the CIA, the NSA, or the National Reconnaissance Office. Most often, In-Q-Tel doesn’t even ask for an equity stake in return. “We’re not looking for ‘deals.’ We’re looking for solutions to problems,” says Levitan.
Those problems fall into five specific areas: application software and analytics; bio- and nano-technology and chemistry; communications and infrastructure; digital identity and security; and embedded systems and power. As the Boston area has bounced back from the dot-com crash of 2001 and the subsequent drought of startup activity, it’s developed companies working on new capabilities in all five areas, Levitan says.
“With Boston coming out of its cryogenic freeze, so to speak, we’ve seen a lot of really interesting, viable business plans being put together,” he says. “We looked around and asked where are the best places to find and fund innovation, and in Boston, the combination of universities and investors and the number of people starting new companies is significant and accelerating.”
The Waltham office—which, for now, will house just Levitan and partner Simon Davidson—is only In-Q-Tel’s second regional outpost. (The first, in Menlo Park, CA, was set up a year after In-Q-Tel’s founding in 1999.) “When you look at all the statistics of where the venture capital firms and educational institutions and entrepreneurs are and where they settle, Boston is right up there,” says Davidson, whom I reached by phone. “It’s a clear example of how we needed to expand our model and take advantage of the opportunities that are being extended to us from the New England area, but that are just a little bit tougher to do from Arlington.”
In-Q-Tel was founded in part because R&D experts in the intelligence community realized that it was so tough for small companies to work with the government. With the rise of the venture capital industry in the 1990s, it became easier for many technology startups to seek venture funding for commercial projects than to go for government grants or contracts, especially in the face of a government procurement process seemingly “custom-made to discourage innovation,” in the words of a Harvard Business School study of In-Q-Tel published in 2004. CIA director George Tenet and others also realized that if the intelligence community wanted to be on the technological cutting edge, it could no longer afford to fund expensive, customized systems, but would need to learn how to integrate commercial off-the-shelf technologies.
And that explains In-Q-Tel’s focus, first and foremost, on helping its portfolio companies do well in the marketplace. “We want to help accelerate them to commercial success. That’s job number one,” says Levitan. “If we can see a way to adapt the technology for the government, and the adaptation benefits the company, that’s when we really have the ability to help them. Then everyone wins—the products get better, the addressable market grows, and the investors see revenues.”
I asked Levitan and Tighe whether the startups they contact are sometimes startled to hear from the CIA’s venture arm. The answer is yes. “We are often knocking on their door because we want to speak with them about an application that’s outside what they were looking at,” Tighe said. For example, one of In-Q-Tel’s early investments was in Keyhole, a Mountain View, CA, company that was assembling digital map and satellite data into an easily browsable format. “They were looking to market this to real estate dealers,” Tighe says. But with In-Q-Tel’s assistance, the company started to think more broadly—and their application grew into a little something now known as Google Earth.
With help from Levitan and Davidson, a few unsuspecting Boston-area startups may be about to discover untapped markets for their own products. “Boston is as important as any other place in the country where we invest,” Levitan told me. “I think part of what’s going to change here now is the velocity of deals. We’ll have the ability to host more meetings in our offices, as opposed to by phone, or at other companies’ offices—or at Legal Sea Foods.”
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