Getting to "yes" in a world of "no"…

Given that few VC funds actively invest in security or camera technology companies, I was pleasantly surprised to find one – In-Q-Tel – that puts money into both. Here’s the list of companies close to my home sector it has backed:-

  • Pixim – well-known sensor company, whose per-pixel ADC technology capture wide dynamic range images
  • LensVector – compact solid-state (i.e. no moving parts) autofocus tech startup
  • Rhevision Technology Inc – compact liquid lens autofocus tech startup
  • Pelican Imaging – computational cameras startup
  • 3VR – surveillance video data mining startup

If you want to see a few more, here’s a nice slideshow from Forbes Magazine highlighting 10 startups backed by In-Q-Tel (the matching article is here), and there’s a more complete listing on this Defense Industries website.  However, I was even more surprised by the story behind In-Q-Tel

At the height of the tech bubble in 1999, the CIA looked across at the vast array of hot technology being developed by Silicon Valley startups and was feeling rather left out. How could it get a foot inside the door of the new generation of hot tech startups making intelligence-related technology? It decided on a fairly radical strategy: start its own Venture Capital fund. That’s right – so just as Intel Capital is the corporate VC arm of Intel, In-Q-Tel is the VC arm of the CIA.

As you might perhaps imagine, there isn’t a lot about In-Q-Tel on the Internet beyond the observations (a) that it usually invests $500K to $2M per deal, (b) that it usually juniors on deals (i.e. comes in alongside a mainstream VC), and (c) that it has to date been unusually successful with its investments (as compared with the dismal returns most VC funds have managed over the latest decade or more). Oh, there’s a stinky 2006 New York Post article on it (courtesy of the WayBack Machine) that got suitably skewered here, but that’s pretty much it.

Of course, the problem with any fund (particularly government or federal-backed) that likes to come in second is that you need to find a lead fund to come in first, and this can be hard if (as with In-Q-Tel) you’re not focused on an absolutely red-hot sector or area where VCs congregate. Or put it this way: VCs like to be herd but not seen.

Personally, I despair of exec summaries containing the words ‘viral’, ‘social media’, or ‘geolocation’, for the simple reason that the excess attention these receive comes at the expense of attention received by more overtly ‘real-world’ startups (OK, such as mine, so slap me for it). So given all this, perhaps the biggest surprise of all for me would be if, in such a difficult time for VCs, In-Q-Tel is still managing to maintain its dealflow (it apparently gets ~$37m per year federal funding).


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