The CIA-backed venture fund that helped launch Palantir and Google Earth

In-Q-Tel was based in 1999 by the CIA—sure that CIA, the Central Intelligence Company—with the mission of closing a perceived innovation hole between Washington’s safety institution and Silicon Valley. Innovations just like the Molar Mic are the explanation In-Q-Tel exists. Over its 26 years in enterprise, the fund has helped launch greater than 800 firms. Of the businesses on this yr’s NatSec 100 Report, an annual index of the fastest-growing venture-backed protection startups, In-Q-Tel is an investor in 32—way over another fund.

Among the firms the fund backs are publicly identified, others are secret—as is the full sum of money In-Q-Tel has invested because it started. (Fortune’s estimate, knowledgeable by the final 25 years of In-Q-Tel’s tax disclosures, is a minimum of $1.8 billion and certain extra. However In-Q-tel itself, and sources near it, declined to share or talk about any numbers.) Regardless of the quantity, by and enormous, the businesses In-Q-Tel picks are all constructing applied sciences judged to be important for U.S. nationwide safety. 

Xinhua/Yin Bogu/Getty Photos

What’s extra, when it finds a winner, extra conventional enterprise buyers usually comply with its lead. A few of In-Q-Tel’s picks have grown to grow to be huge gamers in their very own proper. Early on, the fund backed the autonomous weapons maker Anduril, which was final valued at $14 billion. In-Q-Tel additionally backed Palantir, provider of massive information analytics to the navy and intel businesses. Palantir might be the clearest signal that Silicon Valley has shacked up with the Pentagon for good: It was just lately valued at $250 billion, surpassing conventional protection contracting titans like Northrup Grumman, Lockheed Martin and General Dynamics, despite the fact that its income, at below $3 billion final yr, is only a fraction of these giants’. 

It’s attainable, even doubtless, that you’ve got one among In-Q-Tel’s greatest successes put in in your telephone now. In 2003, In-Q-Tel invested in a mapping firm known as Keyhole, that was seeking to construct a software for the Pentagon’s Nationwide Imagery and Mapping Company. Inside weeks, in line with In-Q-Tel, the company had put Keyhole’s expertise to work supporting U.S. troops in Iraq. Two years and one acquisition later, a brand new, industrial model of the product launched. The brand new proprietor known as it Google Earth.

Organizationally, In-Q-Tel is an odd duck. It’s an impartial enterprise capital fund, but it surely contracts solely with the federal authorities. Tax data present that it’s sitting on roughly $1 billion in property, but it surely operates as a non-profit. The Virginia-based fund’s practically 200 staff are charged with discovering and funding firms whose expertise may assist the U.S. intelligence group or Protection Division. In-Q-Tel at the moment receives round $100 million in extra taxpayer cash per yr to take a position. It places the businesses it picks in contact with finish customers inside the federal government to refine their merchandise, all in hope of yielding tech that’s each commercially profitable and helpful to individuals defending U.S. nationwide safety.

In a second when protection tech has all of a sudden grow to be a scorching sufficient commodity that enterprise capitalists are venturing to Washington in drive, In-Q-Tel is one thing of an elder statesman. It stands as a quiet corrective to the concept Elon Musk’s Division of Authorities Effectivity was the primary time start-up-style disruption touched the federal authorities. For 25 years, In-Q-Tel has been educating the Pentagon easy methods to fail quick and be agile.

“It’d be nice for them to get credit score for the consistency of the work they’ve been doing when these items was not a fad,” says Paul Kwan, a managing director at Common Catalyst, a enterprise fund with $32 billion below administration that has backed Airbnb, Stripe, and Instacart. On a number of events, Common Catalyst has taken be aware of In-Q-Tel’s early picks and co-invested. That’s commonplace. In-Q-Tel has stated that, for each greenback it invests in an organization, industrial VCs can normally be counted on to take a position round $40 extra. 

Kwan says this halo impact partially grows out of the cadre of consultants that In-Q-Tel retains on employees. Not like conventional VCs, they topic candidate firms to intense, in-house technical vetting earlier than funding them. “It’s a large proctology examination, but it surely’s price it to get that stamp of approval,” he says.

In 2004, a researcher on the Air Drive Institute of Know-how interviewed CEOs of a dozen firms who’d obtained backing from In-Q-Tel. Certainly one of them described the vetting course of as having “a bunch of PhD’s sitting in my workplace for 2 or three months asking questions that no industrial buyer, even Fortune 500 clients, had requested us.” He additionally famous, “These individuals actually get in your shorts.”

In-Q-Tel’s CEO, Steve Bowsher, has spent a decade and half working to maintain that course of going. He’ll be the primary to have a good time the high-dollar, high-profile successes. “If we earn a living as a part of that, that’s nice,” he tells Fortune. “However that’s not the first purpose.” 

The purpose, Bowsher says, is what In-Q-Tel internally describes as “pilots and adoptions”: That’s, testing startups’ tech with individuals contained in the U.S. authorities after which seeing whether or not they completely put it to work. Which is to say, in contrast to perhaps each different investor throughout the panorama of capitalism, these buyers are particularly not obsessing about whether or not their investments earn a living.

In a way, In-Q-Tel measures success with benchmarks which might be something however monetary. One is cultural: prodding the U.S. nationwide safety equipment, and the businesses that serve it, to vary their sometimes-sluggish methods. The opposite is extra private, and felt keenly by anybody concerned in nationwide safety: having the newest technological edge helps save American lives.

Impressed by James Bond motion pictures

In 1998, it felt just like the world had grow to be digital, seemingly in a single day. That yr marked the founding of Google, the discharge of the iMac, and America On-line’s buy of Netscape for greater than $4 billion. World-changing expertise was popping out of California. Washington, D.C., was taking part in catch-up. 

Among the many safety insiders taking discover was Sue Gordon, a profession CIA officer who later rose to grow to be the second-highest rating intelligence official within the U.S. authorities. Gordon was the driving drive who acquired In-Q-Tel up and working. (I interviewed her for a podcast in 2024, and once more for this story in June.)

“Silicon Valley couldn’t discover their approach into the CIA and nationwide safety group as a result of it’s tuned for the large guys within the protection industrial base,” Gordon informed me final yr. “We knew that the great things was taking place in Silicon Valley. However…we wanted to go outdoors to get entry.” One answer, she felt, could be to arrange an funding fund that might bridge these worlds—to jumpstart firms constructing cutting-edge spy tech, after which put that tech into the fingers of the U.S. businesses that wanted it most. 

Gordon says she nonetheless has a serviette from the bar on the legendary Hay Adams Lodge in D.C., the place she and a few fellow In-Q-Tel founders first brainstormed names for the group. And sure: The “Q” was a deliberate reference to the Bond motion pictures. “I insisted,” Gordon tells me. “All of the stuff that Q would deliver out was the best a part of the films.”

Chip Somodevilla—Getty Photos

Gordon enlisted the assistance of Michael Crow, then an administrator at Columbia College, specializing in science coverage. Crow, who’s now president of Arizona State College, is the chair of In-Q-Tel’s board. He says one of many greatest hurdles standing between In-Q-Tel and launch was the byzantine algorithm the U.S. authorities has for procuring protection tools. Bureaucrats had been initially allergic to In-Q-tel’s plans to pilot new tech rapidly, and a few legacy contractors felt threatened.

“It form of blew up the entire notion of procurement,” Crow says. “Administrative-type individuals had been like, ‘Properly, we gotta kill this factor.’”

However In-Q-Tel survived the preliminary opposition, partially, by making itself indispensable. One key function was a system that Bowsher put into place not lengthy after he joined the fund as managing companion in 2006. Borrowing an concept from personal fairness companies the place associates of his had labored, Bowsher skilled a cadre of associates whose job was primarily what he calls “dialing for offers”—scouring magazines, newspapers, blogs and newsletters for promising firms, chilly calling them, and arrange conferences to find out about their enterprise. 

“It’s very straightforward simply to take a look at all of the enterprise plans that somebody proactively submits to you and really feel like, ‘Hey, I’m taking a look at a whole lot of offers and proper now I’m selecting the perfect ones.’” Bowsher says. “You bought to determine, am I seeing high quality offers right here?”

He says In-Q-Tel now appears into round a thousand or so firms per yr, with a roughly 50-50 cut up between makers of {hardware} and software program. That work helps In-Q-Tel widen its aperture to see the broadest attainable swath of recent tech, Bowsher says. Simply as importantly, it writes up its analysis on bleeding-edge start-ups—making itself helpful to the intelligence group, even in the case of firms during which it doesn’t make investments.

“One director of science and expertise at CIA stated to us one time, ‘One of many worth propositions of In-Q-Tel to me is: no surprises,’” Bowsher says. This official informed Bowsher that each time he’s informed about expertise that would have an effect on the CIA’s mission, he’s persistently in a position to say, “‘I learn about that expertise. In-QTel briefed me on it six months in the past.’”

Studying to fail quick

Bowsher is initially a son of Washington. His father spent most of his profession in authorities—as a CPA working the U.S. Navy’s finances, and later as a comptroller basic on the GAO, Congress’s auditing and investigative workplace. After getting a B.A. from Harvard, Bowsher headed west to attend Stanford Enterprise College and stayed in Silicon Valley to work for a number of start-ups. The primary one—making an attempt to launch multiplayer on-line video gaming within the dial-up period—crashed and burned.

“It’s a [multi-]billion-dollar business proper now, proper? My son spends hours taking part in video video games. We had been simply too early,” Bowsher says. “These indicators had been all there and I missed them.”

He got here into work one Friday morning to study he’d been laid off, together with the whole advertising, enterprise improvement and product staff. He stepped out of the constructing, feeling shocked, clutching paperwork to file on the San Mateo County unemployment workplace.

“And actually, I assumed to myself, how am I going to name my dad and mom—who paid for me to go to Harvard, you recognize, who helped me pay to go to Stanford?,” he says. “How am I going to go name and inform them I’m unemployed?” 

Bowsher’s father recommended that he go into banking or consulting. However Bowsher’s contacts in Silicon Valley had a really totally different response. “My associates began emailing, ‘Hey, you must come work at Yahoo,’ ‘You need to come work at Excite,’ ‘You need to come work at this firm or that firm.’”

Bowsher says the second demonstrated to him a core a part of the Valley’s ethos: Failing quick is okay. Failure winnows out ill-conceived or ill-timed concepts, so founders can extra rapidly make approach for higher concepts. “Folks in D.C. simply can’t get their heads round it,” Bowsher says. “Silicon Valley is all about: We’re going to fail as a lot as attainable as a result of the extra occasions you fail, the nearer you get to that extraordinary success,” he says. 

It’s a really totally different mannequin than the legacy Pentagon contracting framework, which introduced U.S. taxpayers, say, the F-35 fighter jet. Plagued with early issues, that airframe has taken 20 years to design and construct, at a value of $442 billion so far—which adjusted for inflation is twelve occasions greater than the entire Manhattan Project.

Courtesy of In-Q-Tel

Failing quick doesn’t essentially spell the tip for firms that In-Q-Tel backs. In-Q-Tel’s chief of employees, Yan Zheng, met with Fortune on the fund’s sleekly fashionable headquarters simply outdoors of D.C. in Tysons, Va.. The workplace was all spotless metal, glass, and oak parquet, with nary a espresso cup misplaced. Zheng was tie-less in a slim navy go well with, wanting like neither he nor his outfit had been conscious wrinkles exist. However he leaned ahead in his seat, smiling, as he informed a narrative about an epic mess.

It concerned Alteros, an In-Q-Tel startup that made a blimp-based communications antenna. Aerostats, as they’re identified, are a good way to arrange highly effective comms towers in distant areas. They usually require a 24/7 human crew to watch climate circumstances and preserve the balloon aloft. However Alteros made a model that deploys and flies autonomously—which caught the curiosity of some of us contained in the U.S. authorities, at an company whose id can’t be disclosed.

“These of us had been spending a number of hundreds of thousands of {dollars} to discipline a much less succesful system,” Zheng says. “ People actually had been like, that is going to be a great answer. It was going to economize.”

However then got here the demonstration flight. At an outdated mining website 5 hours outdoors of Boston, observers from In-Q-Tel and the federal government company watched the Alteros technicians ship their blimp aloft. 

“After which the entire thing simply ripped aside. And it simply went—psshh.” Zheng says. “Everybody was, like, deflated.”

It regarded like the corporate’s take care of the federal government could possibly be useless. However Alteros proved prepared to maintain spending cash to refine the design. And right here’s when one other uncommon side of In-Q-Tel’s enterprise mannequin got here into play. The key authorities buyer stepped in to assist—suggesting that as an alternative of Alteros making an attempt to make all the pieces itself, it ought to contemplate shopping for stronger blimp material from one of many two distributors utilized by the U.S. navy.

“They did, and it labored,” Zheng says “And that was as a result of they had been good about taking that suggestions from that authorities companion.”

This working relationship that In-Q-Tel units up between start-ups and folks on secret branches of the U.S. authorities org chart is one other approach the fund differs from industrial enterprise capital. Think about, for instance, {that a} small tech firm desires to check a gadget they suppose could be an ideal match for SEAL Workforce 6. 

“SEAL Workforce Six may be very busy. They don’t seem to be going to be concerned,” says AJ Bertone, a managing companion at In-Q-Tel who manages the fund’s West Coast staff. “And so, our technologists and actually everybody at In Q Tel, we’re translating between these two very disparate worlds, and serving to to align the totally different expertise and engineering choices.”

“After which,” Berton added, “We’re going to be there once they’re really placing it to work. Not essentially like, within the Osama Bin Laden raid state of affairs, however in some kind of take a look at.”

To be clear, nobody Fortune spoke with would affirm or deny that In-Q-Tel has labored with SEAL Workforce 6. (Take that nonetheless you’d like.) 

However determining which particular authorities badasses are getting the tech issues lower than understanding the significance of the bridge that In-Q-Tel builds between these badasses and the start-ups who’d prefer to serve them. This appears to be the center of the argument In-Q-Tel makes for investing taxpayer cash—your cash—in personal, for-profit firms. 

Discovering firms that Silicon Valley misses

In-Q-Tel says it solves issues that authorities and industrial enterprise capital deal with poorly on their very own. First, they’ve discovered a number of start-ups which might be making game-changing tech however are too small to curiosity a VC business constructed round searching billion-dollar unicorns. And that’s the place In-Q-Tel fills the hole. 

In-Q-Tel desires firms which have an addressable industrial market outdoors of any potential authorities contract—however the market doesn’t have to be big. “Are you in a market that, like, you’re not going to present a 10X ROI, or a 2X, however you’re nonetheless going to get a product to the federal government?,” Zheng asks. “That’s high-quality with us.”

Second, Zheng says, In-Q-Tel solves an issue that the federal government nonetheless struggles with. Greater than ever, the individuals defending U.S. nationwide safety want cutting-edge expertise. Typically huge protection contracting “primes” can provide it. However historical past suggests expertise’s edgiest edge is commonly being honed on the fringes of Silicon Valley. Should you’re a bureaucrat in command of authorities procurement, this poses an issue.

“You’re going to get two guys in a storage and also you’re going to get a Raytheon coming in at you,” Zheng says. “And proper now, you take care of them by saying,’Two guys in a storage, you possibly can’t apply, we’re solely coping with primes.’That’s the mannequin that the federal government is 1753785827 making an attempt to repair.”

Historically the federal government operates on timelines measured in a number of years. For tiny new firms—centered on getting their subsequent spherical of funding, or making payroll subsequent month—it’s a tough system to plug into. In-Q-Tel payments itself as providing a pathway for small innovators to speak to the federal government. “We’re the translator, the interpretation layer,” Zheng says. 

Bowsher says he’s assured that the Trump administration will see the worth this translator gives, at the same time as DOGE has taken a chainsaw to whole businesses. For the CEO of a company doing hard-to-explain work with hundreds of thousands of taxpayer {dollars}, it’s a fragile second. 

Early-stage VCs are optimistic by nature, Bowsher says, and the optimist in him sees a possibility in an administration that’s prepared to maneuver quick, break outdated guidelines and search counsel from veterans of Silicon Valley. “There are a set of individuals coming in who we labored with within the first Trump administration that like us,” Bowsher says, “and imagine in our mannequin and imagine that we may also help.”

“I believe the problem or danger for us is, you recognize, there’s clearly a motion inside this administration to chop prices and ship effectivity,” he says. “You don’t need to get caught up in some form of unintentional minimize the place somebody minimize you as a result of they didn’t perceive who you might be and what your worth proposition is.”

Bowsher’s not alone together with his concern. “I can think about DOGE coming in,” Gordon informed me late final yr, “and saying what the hell is that?”…What is that this mannequin? Who considered it?”

In-Q-Tel doesn’t present up within the press usually, however when it has, some shops have identified that it doesn’t comply with common procurement guidelines, or that members of In-Q-Tel’s board in a number of instances have had ties with firms In-Q-Tel has backed. Others talked about that In-Q-Tel’s CEO, regardless of working for a non-profit, receives a wage of $2 million. 

“That’s far lower than the CEO of Northrup Grumman makes,” Gordon informed me pointedly. “They don’t write the story of what exists due to it.”

‘They took it in fight, and so they didn’t get shot’

For an instance that proved Gordon’s level, I spoke with one other promising-but-small firm that claims it wouldn’t have landed a protection contract with out In-Q-Tel’s assist. The corporate is just like the maker of Molar Mic, in that the per-unit price of the gadget it makes runs in extra of $5,000—doubtless excluding it from an enormous shopper market, and from huge funding bucks from conventional enterprise capital.

The corporate known as Bounce Imaging, and it launched in 2012 with the thought of creating a softball-sized system lined with cameras. As soon as tossed right into a room, the ball may seize a real-time, omnidirectional video of the scene and ship it to a person’s telephone. For, say, a commando or SWAT staff member getting ready to storm right into a room that is perhaps stuffed with hostages and a gunman, the enchantment was apparent: Swipe round on the picture, and it exhibits the place the dangerous man is.

 “This can be a actually easy factor to elucidate, but it surely’s really turned out to be a tremendous technical problem to tug off,” says Francisco Aguilar, Bounce Imaging’s CEO. The problem was twofold: cramming the {hardware} and battery inside what is basically a big rubber ball, and designing software program that would sew collectively all that lens information and stream it to a telephone with minimal lag.

Courtesy of Bounce Imaging

Courtesy of Bounce Imaging

Early on, the corporate had round 10 staff and was doing about $1 million price of enterprise per yr, Aguilar says. It was piloting variations of its system with 100 or so legislation enforcement businesses throughout the U.S. However progress was gradual, and the principle approach ahead appeared to be promoting to extra cops.

Then, in 2018, In-Q-Tel invested an undisclosed quantity. After that, Bounce began working with companions within the Protection Division. Aguilar says the corporate has since tripled its employees, and is on observe to do $15 million in enterprise this yr. “We’re about to do a significant deployment with a NATO ally that’s going to be hundreds of thousands of Euros,” he says.

The digicam has grow to be a go-to software for Particular Operations Command, Aguilar says, and the corporate expects to have near 1,000 of their methods in DOD by the tip of 2025. He can’t disclose which items are utilizing them, however he can discuss a few of the suggestions he’s obtained. 

“In any struggle,” he says, “you might be inevitably in these conditions the place you might be sending an individual or a canine right into a confined house to attempt to get somebody out. And in these environments, casualties are frequent.” 

As superior as warfare has grow to be, there are nonetheless individuals working for the U.S. authorities whose job is to run by means of a doorway first, realizing there’s a really actual likelihood they’ll be shot once they do. Not each tactical squad has the house or finances to hold a robotic. Bounce’s digicam prices much less, and matches in a pouch on somebody’s gun belt. 

However there’s no billion-dollar enterprise to be discovered fixing this drawback. For an enormous industrial enterprise capital agency, the beneficial properties and prices right here would hardly register on a stability sheet. And the true price of labor like that is solely tallied by orphans and widows, when the flag-draped coffins come residence. 

In order that’s the place the U.S. taxpayer, In-Q-Tel and the maker of the ruggedized, throwable digicam are available in.

“I’ll inform you that there have been items which have taken casualties in particular situations on each rotation that stopped taking that kind of casualty,” Aguilar says. “After they use our digicam—we have now been informed by individuals who I belief who do that—that they’ve come out with out that casualty.”

“They used it. They took it in fight,” he says. “And so they didn’t get shot.”