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[infowar.de] Interview mit In-Q-Tel CEO
Schon vom 2. Juni, aber gerade erst gefunden.
RB
<http://news.com.com/The+secret+behind+the+CIAs+venture+capital+arm/2008-1082_3-5728548.html>
The secret behind the CIA's venture capital arm
By Michael Kanellos
Story last modified Thu Jun 02 04:00:00 PDT 2005
Running the publicly funded arm of the CIA in Silicon Valley for the last
six years, Gilman Louie is used to living in a fishbowl of sorts.
As chief executive officer of In-Q-Tel, Louie has the job of operating as
a venture capitalist charged with helping to deliver new technologies to
the CIA as well as the rest of the U.S. intelligence community.
"At the end of the day the mission is to find technologies that can
protect lives," he says.
But In-Q-Tel occupies a unique rung in the federal bureaucracy. As a
publicly funded operation, it is bound by the usual requirements governing
conflict of interest that are familiar to other government agencies. At
the same time, it is forced to keep a lot of information about what it's
doing close to the vest because, well, it's the CIA.
Sometimes that's an uncomfortable fit. Earlier this year, for instance,
the New York Post raised the specter of a conflict of interest after some
employees sold stock in a company In-Q-Tel had invested in. CNET News.com
recently sat down with Louie to find out more as well as to learn how he
views the evolving role of In-Q-Tel in equipping the government with new
technologies in its war on terror.
Q: In-Q-Tel was recently accused by a New York Post columnist of being
involved in a "pump and dump" scheme. Is there a conflict of interest
between being a government-funded nonprofit and conducting private stock
sales?
Louie: I don't think the writer was off base in asking the question. He
may not have had all these facts right, but the foundation of the question
of whether it's reasonable to have a nonprofit whose principal job it is
to make investments is: Have employees benefited?
When we were setting up In-Q-Tel, the CIA said, "Look, we want you to
build a model that can analog to the commercial world." In our particular
case, we wanted to get people from the industry. You've got to remember it
was 1998 and that was in the middle of the bubble.
But how do you square that circle? You've got the mission of a publicly
financed company that also has to take into account the realities of the
surrounding world.
Louie: Here was the basic premise: How do you get people first to treat
the taxpayers' dollars as if it was their own? No. 2 is how do you attract
the talent to come on? How do you get people from the best schools or the
private sector?
We said we want to have a side-by-side fund, which is pretty universal in
venture capital. We designed a compensation scheme that's fair that would
get us to the right people--but not overly compensate them. We have an
agreement with the government that says after the moment a stock becomes
available, you have a short period of time where you're expected to
liquidate those resources. We tie the employee funds in the same way. You
don't get to choose; we choose for you.
What do you mean?
Louie: Which stocks to play in...You get a percentage to all the deals.
But it comes off of your salary. We give you annual compensation pay, and
a certain percentage of that is set aside for long-term compensation that
is automatically invested. You pay your taxes and then we take a chunk of
that to invest in your stocks. And they may do well, and they may not do well.
Is this a unique arrangement when it comes to government-funded agencies?
Louie: Well, there wasn't really a government venture fund until we kind
of showed up. Is it unique now among government venture funds? The answer
is no, because everybody followed us.
It was claimed that of the insiders who started to sell the stock when it
began to go south, nearly all of them were In-Q-Tel employees.
Louie: Here's how that works. In our side-by-side funds, most of the
shares that employees are going to get are 144 restrictive stock. When an
In-Q-Tel employee sells as part of the normal course of business,
employees can choose to do one of two things: They either can receive the
stock, or they can sell with the company.
Then the company sells (stock) on their behalf?
Louie: Yeah, but then because of the 144 registration requirement you had
to disclose everybody who's selling. Most nonprofits have stern policies
on how to distribute because you don't want to be gambling with people's
money, and our view is we have a responsibility to the taxpayers...Our
primary objective is to pick the right companies. So if there are
proceeds, that's an added benefit. But that's not why you're doing this.
If you talked to the people inside the CIA, they will tell you that we
have had an impact on the way they think about the problems.
There is one last point which the article failed to mention: There's only
a small group of decision makers who actually approve any deal. That's the
board of trustees and the CEO. The board of trustees does not get any
equity in any of the companies. All of (my equity proceeds) from day
one--including the principal and not just the proceeds--is donated
immediately to a charity.
When you received the charge to start In-Q-Tel, it was supposed to be an
experiment for five years or six years.
Louie: And it was to demonstrate whether or not this model could actually
yield technologies that would be useful for national intelligence. We're
now in year six. We have put a little over 100 technologies into the
intelligence community that are actively being used. Some of them you
know, while other technologies we don't broadly advertise.
Will In-Q-Tel be around for much longer? Is this going to be a renewable
contract, or has that decision not been made?
Louie: It goes on for an annual renewal. You live at the whim of Congress.
When it was first funded, In-Q-Tel received strong support from (Director
of Central Intelligence) George Tenet. He has now gone on to do whatever
he's going to do, and you have a new DCI--Porter Goss. What's his thinking
about the idea of a publicly funded private research venture capital firm?
Louie: Well, I can't speak for Porter, because that wouldn't be fair. When
In-Q-Tel got started, people asked whether this model could work. It's a
pretty risky model, particularly because of how public it is. It's like
living in a fish tank. 9/11 was a big turning point. People said, "We
don't have time to experiment. This stuff really matters now."
How has that translated into practice?
Louie: If you take a look at the Inspector General report, or the 9/11
Commission report, there's a common theme: We don't have the best stuff
being put to use, and we seem to be not able to figure out how to manage
these big kinds of information systems and technology in a way that gets
data into the hands of people who really need it, when they need it. The
cycle times are way too long in government.
Like photo recognition?
Louie: I'm talking about simple things--like how to get an e-mail from one
person to another person securely. We're talking about agencies spending
hundreds of millions of dollars on very basic information systems. The
CIA, quite frankly, is better off than a lot of other agencies because
this has always been a part of their culture. But they, too, recognize the
fact that it takes them a long time to integrate somebody else's
technology in because they have security requirements.
So if Goss was sitting here and asked you for your frank appraisal, would
you tell him, "Mr. Goss, I think that In-Q-Tel has been a successful venture"?
Louie: Have we been able to identify new technology? Absolutely. Have we
taken the money and put it to good use? I think we've done pretty well. I
think if you talked to the people inside the CIA, they will tell you that
we have had an impact on the way they think about the problems.
Basically, these are guys with very high clearance levels, and why would
they trust a bunch of guys coming from Silicon Valley?
The jury, though, is still out on the long-term strategic value of
In-Q-Tel. Can In-Q-Tel be a critical component of the requirement for the
intelligence community to make the necessary changes to deal with the new
world threats? While In-Q-Tel can point to a lot of things in terms of
technology, it really is about how that technology gets deployed in
changing the culture in the new threat environment. The answer to that is,
I don't know.
What percentage of the technology you have found or promoted has actually
been adopted internally in the agency?
Louie: We have like 80 companies who put in about 100 technologies because
some companies have more than one. As a percentage, about 50 percent are
in, 40 percent are still being baked, and 10 percent have been duds...so
we're pretty successful. But the flipside of that is we're so public.
Sometimes you've got to say that unless there's a high payoff on the other
side, you don't want to be accused of doing Frisbees.
Have you had to learn some new bureaucratic skills to get the folks in
Langley to give you sufficient amounts of love?
Louie: No. That kind of comes with any large enterprise. I think about the
bureaucracy of government everybody complains about. But if you go try to
sell into Wal-Mart or FedEx, I don't think this is that different.
Was it difficult to gain their trust as an outsider?
Louie: Basically, these are guys with very high clearance levels, and why
would they trust a bunch of guys coming from Silicon Valley? We haven't
paid our dues. You know, we never walked the point, and most of the guys
have never been in the military. We had no idea of what those guys do.
What they told us very early in the ballgame was, "Why should we trust
you? If we use one of your pieces of technologies and it fails, one of us
can get killed. You have never walked a mile in our shoes."
Of course, like I said, 9/11 changed a lot of that because it was like,
"You know what? Trying something that may not work is better than knowing
that you don't have anything, which would definitely not work." That was
the mindset. Prior to 9/11, it was like, "Well we got 15 years before the
next great threat shows up, so we can take our time."
Are you satisfied with the way things are going?
Louie: We've still got a long way to go.
How much longer do you plan to stick around?
Louie: Anybody sticking around for too long is not a good idea, because
the whole idea is to get people from Silicon Valley to come on in.
Is it a question of burnout?
Louie: There's burnout, but there's also the issue of going native.
Bringing in fresh blood to take a slightly different approach--I think
that's just good.
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