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ROBERT SIEGEL, HOST:

Next up in today's All Tech Considered, one of the more unusual venture capital funds in Silicon Valley. It's run by the CIA. The fund, called In-Q-Tel, was founded in the late 1990s when the CIA was drowning in data, and didn't have the tools to connect the dots. We asked NPR's Steve Henn for this profile.

STEVE HENN, BYLINE: Jeffrey Smith is the former general counsel of the CIA. He was one of a small group of intelligence community insiders who helped set up In-Q-Tel more than a decade ago. At the time, the idea of a government-funded venture capital firm was completely new. And even though this company would be part of the intelligence community, Smith and the others knew it would need to attract entrepreneurs' attention.

JEFFREY SMITH: We were trying to think of names, and we had a number of different names.

(SOUNDBITE OF MUSIC)

SMITH: We really needed something that also had appeal to a wider audience and, frankly, had some sex to it.

HENN: So they named it after Q...

(LAUGHTER)

HENN: ...the man who makes the gadgets for James Bond. And whether you've realized it or not, over the past 13 years, In-Q-Tel has changed your life.

(SOUNDBITE OF MUSIC)

SMITH: Much of the touch-screen technology used now in iPads and other things, came out of various companies that In-Q-Tel identified.

HENN: And invested in. It was also was an early investor in a company that stitched together satellite images and maps.

SMITH: And ultimately, was purchased by Google and became Google Earth.

HENN: Data-crunching startups backed by In-Q-Tel have been bought by IBM and Hewlett Packard. Today, In-Q-Tel has more than $170 million in assets. And up and down Silicon Valley, it's investing millions of taxpayers' dollars in dozens of new startups.

Peter Hadrovic says an investment from In-Q-Tel helped the company he works for, Sonitus, turn a novel kind of hearing aid into a two-way radio you can hide in your mouth. It conducts sound through the bones in your head, and gives people wearing it...

PETER HADROVIC: The ability to receive incoming wireless sound - literally, without using your ears. Device attaches to your teeth and gives you hearing. It's that sound in your head. And you simply have nothing on your ears.

HENN: You have nothing on your ears. And Hadrovic says the device could even be shaped like a tooth. Another company In-Q-Tel is backing is called Infinite Z. It makes holographic displays. David Chavez invited me into his office, and walked me through how it worked.

All right. So I just put on some 3-D glasses...

DAVID CHAVEZ: Sure. Have a seat.

HENN: ...and I'm sitting in front of a - wow.

(LAUGHTER)

HENN: I am looking at a 3-D monitor; what looks like a flat panel TV, but it's cantilevered back at a 45-degree angle. And there, popping off the screen, are all these objects. There's a Scrabble board and a ruler, and all appear in three dimensions. As I walk around the monitor, they look real. They move through space as I do, and my perspective shifts. Then, I take this little laser pointer, and I can pick them up.

CHAVEZ: Pick it up.

HENN: So hold the button down and pick it up.

CHAVEZ: Pick it up. Roll your wrist over and look at the back of it, and try to describe that.

HENN: You can imagine hundreds of uses for a display like this: from computer-aided design to three-dimensional satellite mapping, to medical imaging. But this company, Infinite Z, might not exist today without the backing of In-Q-Tel and indirectly, the help of the CIA.

LAURA MATHER: I worked at the National Security Agency, and I still have no idea how to sell into the federal government.

HENN: Laura Mather is co-founder of Silver Tail Systems. It's a security firm that identifies suspicious behavior online. In-Q-Tel is an investor in her company. Mather says it gives her firm the CIA's seal of approval, and that helps her sell to huge federal customers.

Jeffrey Smith says In-Q-Tel was created to bring technologies like Silver Tail's into the intelligence community quickly. But back when it was created, the original idea was that In-Q-Tel wouldn't be supported by taxpayers forever. It was set up as a non-profit that would reinvest its earnings in its mission, and pay private-sector salaries. Today, its CEO, Christopher Darby, earns roughly a million dollars a year.

SMITH: The salaries in the high-tech community, among successful people, are really quite extraordinary. My father used to say you tend to get what you pay for, and I think that's true.

HENN: But In-Q-Tel has never become self-sufficient. It still receives more than $56 million a year in government support, according to its most recent tax return. But Smith says In-Q-Tel's primary goal was never financial independence, or even to make money. Its purpose was to help the CIA catch up with technology. And he says it's done that.

SMITH: If you go, now, to the desk of an analyst at the agency who's working on any given problem - let's take nuclear proliferation - what they have available to them is breathtaking.

HENN: And Smith says In-Q-Tel deserves much of the credit. Steve Henn, NPR News, Silicon Valley.

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