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DATE=10/6/1999 TYPE=BACKGROUND REPORT TITLE=C-I-A / SILICON VALLEY NUMBER=5-44431 BYLINE=ALISHA RYU DATELINE=LOS ANGELES CONTENT= VOICED AT: INTRO: In a unique experiment, the U.S. Central Intelligence Agency (C-I-A) has set up a company to invest in high-tech companies in California's Silicon Valley. Surprisingly, the spy agency says none of these activities will be conducted in secret. V-O-A's Alisha Ryu in our West Coast Bureau has details of the C-I-A's entry into the world of venture capitalism. TEXT: The C-I-A calls the new company "In-Q-It." The "In" stands for intelligence, the "It" for information technology. And the "Q" in the middle is a humorus nod toward the beloved gadgets expert "Q" in the James Bond movies. But there is little else light-hearted about the agency's new venture. Using 28-million dollars in start-up money from previously classified funds, In-Q- It will invest in high-tech companies and entrepreneurs and form joint ventures with others. The objective -- to integrate Internet technology and applications that could benefit the C-I-A. In-Q-It's chief operating officer, Gilman Louie, says this is the first time a government agency has adopted a private-sector model to meet its needs. He believes the company's success will be critical to the long- term viability of the agency. /// FIRST LOUIE ACT /// Without it being able to achieve a state-of-the- art level of information technology, the basic mission of the C-I-A would be in jeopardy. We are talking about wrong decisions or information getting out into the wrong persons' hands that can cost lives. /// END ACT /// Mr. Louie cites the accidental bombing of the Chinese embassy in Yugoslavia, a target chosen by the C-I-A, as an example of what happens when the agency generates erroneous or incomplete information. But in order to attract the best minds to help upgrade its information-gathering system, Mr. Louie says the C-I-A realized it needed to make In-Q-It's activities highly visible and public. /// SECOND LOUIE ACT /// The problem today is that "operating in the black" (in secret) is not a viable solution. First of all, to attract a talent, the talent needs to be able to take that technology and spin it to the commercial side in order to get financial gain. And without that financial gain, the government takes a second seat to commercial needs. So, in terms of attracting talent, they realize they need to do this in the open. /// END ACT /// Mr. Louie, who is a veteran Silicon Valley software executive, says the C-I-A faces the same competitive challenges as any other large corporation trying to tap into Silicon Valley's talent pool. While In-Q-It will remain non-profit for the time being, he says his eventual goal is to make the company self-sustaining from its investments. /// THIRD LOUIE ACT /// I think this model will take some time to prove out whether or not it is a model that will really work. I think there is some level of risk. I applaud the C-I-A for taking the risk. /// END ACT /// In-Q-It will not be entirely based in California. Mr. Louie says the company will keep an office in Washington D.C. to coordinate with the agency and with a board of directors that includes well-known high- tech executives, as well as former Defense Secretary William Perry. (Signed) NEB/AR/TVM/gm 06-Oct-1999 18:21 PM EDT (06-Oct-1999 2221 UTC) NNNN Source: Voice of America .