In 1998, CIA Director George Tenet and senior intelligence officials begin formal development of the concept that will become In-Q-Tel -- the intelligence community's unprecedented entry into venture capital. The initiative, originally codenamed "Peleus," is designed by Sue Gordon, who "designed and spearheaded the formation" of the organization, and championed by Tenet, who recognizes that traditional government procurement processes are too slow to keep pace with the rapid innovation cycle of Silicon Valley technology firms.
The concept grows from a recognition that the post-Cold War technology landscape has fundamentally shifted. During the Cold War, the intelligence community and defense agencies drove technological innovation through agencies like DARPA and massive classified programs. By the late 1990s, that dynamic has reversed: commercial Silicon Valley firms are producing the most advanced technologies in computing, telecommunications, data analytics, and satellite imagery, but have little incentive to navigate the cumbersome federal procurement process to sell to government agencies.
Tenet's solution is radical: rather than reforming procurement, the CIA will create a venture capital firm -- legally independent, structured as a nonprofit corporation, but funded by the CIA and directed to invest in startups developing technologies relevant to intelligence. The concept draws on advice from Norm Augustine, former CEO of Lockheed Martin, who agrees to chair the new entity's board. Ruth David, CIA's Deputy Director for Science and Technology, also plays a key role in the concept's development.
The In-Q-Tel concept is formally approved in late 1998, and the entity is incorporated in February 1999 as a Virginia nonprofit corporation, with its public launch announced by the CIA on September 29, 1999. But the 1998 development period is itself significant because it represents the moment when the intelligence community decided to embed itself financially in the private technology sector -- not merely as a customer but as an investor with equity stakes and board-level relationships.
The implications for intelligence privatization are profound. In-Q-Tel would create financial entanglement between the CIA and private technology companies, establishing a "revolving door" in which intelligence officials could transition to lucrative positions at In-Q-Tel portfolio companies. Unlike traditional defense contracting, the venture capital model meant the CIA was not just buying products but shaping the development of entire technology sectors -- surveillance, data analytics, biometrics, geospatial intelligence -- by directing capital toward companies whose technologies served intelligence objectives. The firms funded by In-Q-Tel would include Palantir, Keyhole (later Google Earth), and Recorded Future, each of which would become foundational to the post-9/11 surveillance infrastructure.