CIA's risky business

The strangeness of Silicon Valley's truth has caught up with its fiction. We hear echoes of Neal Stephenson's novel, "Snow Crash," in the announcement that the Central Intelligence Agency will fund a new venture capital firm, ostensibly seeking a closer relationship with IT innovators.

The strangeness of Silicon Valley's truth has caught up with its fiction. We hear echoes of Neal Stephenson's novel, "Snow Crash," in the announcement that the Central Intelligence Agency will fund a new venture capital firm, ostensibly seeking a closer relationship with IT innovators.

Even the CIA seems to be having a hard time deciding if this is parody or real life. The new firm's unwieldy label, In-Q-It, is a bow to "Q," the acerbic gadget guru of the James Bond movies. In-Q-It enters the SiV casino with a stake of $28 million—more than five times Bond's bankroll when he went to Casino Royale, but a small number by the standards of SiV market capitalizations.

It's not clear to us that the CIA needs its own stake in this game—especially given the commitments that are already being made by other, even better-funded players. Private capital is already backing the risky but rewarding ventures of developing new communications tools, offering resources such as satellite imagery on the open market and lowering the cost of traffic analysis and signal-processing techniques.

In-Q-It CEO Gilman Louie mouths the CIA line that an ownership stake will streamline high-tech procurement, but any SiV executive can tell him that bringing R&D in-house can narrow your options—and may make it even harder to get candid estimates of schedule, cost and performance.

We're sure, moreover, that no SiV executive is so naïve as to overlook the strings that come attached to government funding for new technology development. Any aerospace executive, including In-Q-It board member and Lockheed Martin Chairman Norm Augustine, understands the tensions in a relationship of this kind. Conversely, as we reported in last week's issue, the private sector can tell the CIA more than it wants to know about the fits and starts of relying on startups as strategic technology partners.

Tentative stakeholding in SiV startups can complicate the relationship between the U.S. government and the IT industry, but it won't buy the CIA anything it can't get by other means.

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