Government Venture Capital: a Case Study of the In-Q-Tel Model

Abstract

The evolution of information technology (IT) has outpaced the federal acquisition system's ability to keep up. And as the United States security strategy increasingly demands information superiority to defeat its enemies, national security institutions cannot afford to lag behind the advancements in IT. The CIA addressed their inability to procure the cutting-edge technologies needed to meet their mission requirements and adopted an innovative acquisition strategy to bridge the gap. They engaged the IT sector through In-Q-Tel, a venture capital firm that invests Agency money in companies that could produce commercially viable technologies to fill the Intelligence Community's (IC) pressing IT shortfalls. This thesis explores two aspects of the In-Q-Tel model, whether In-Q-Tel creates relationships between the IC and promising technology companies that would not have occurred otherwise, and the contributions In-Q-Tel makes to its portfolio companies that contribute to their success. The results of this study suggest that In-Q-Tel has promoted new relationships between the IC and technology firms that were not actively seeking the government market as well as bringing the IC together with technology companies that had viable technology solutions but for various reasons could not connect with the right users within the IC. Findings also show that In-Q-Tel's technical validation of its portfolio companies' products, its established network of investors and technology users within the IC, and the capital provided to fund product development and/or operating expenses are highly valued by its portfolio companies and directly contributed to the companies' success.