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CIA's investment arm expands high-tech reach

In-Q-Tel, the venture capital arm of the CIA, is aggressively expanding its technology portfolio by pumping new investments into startups involved in networking, energy, semiconductor and software visualization markets.

On Thursday (Oct. 20), In-Q-Tel (Arlington, Va.) separately announced undisclosed investments in three startups and no less than six companies this week alone.

The spy agency's venture capital arm invested in two energy-related companies: Electro Energy Inc. and SkyBuilt Power Inc. It also poured money into two networking startups: Ember Corp., and Tendril Networks Inc.

And not to be outdone, it also invested in two security and visualization software companies: FMS Inc. and Idelix Software Inc.

In total, In-Q-Tel has invested in some 80 companies since its inception in 1999. The venture arm acts as an independent, private and not-for-profit company that assists the CIA in identifying, acquiring and deploying cutting-edge technologies.

After focusing on data mining and security technologies, the organization appears to be expanding into communications, energy, mesh networking, wireless and other new markets.

In 2003, for example, it invested $10 million in Bay Microsystems Inc., a developer of packet processing and traffic management chips. Last year, In-Q-Tel and others poured $7 million into Dust Inc., a developer of devices for wireless mesh sensor networks (see Feb. 18, 2004 story).

In-Q-Tel has expanded those efforts by investing in Ember and Tendril. Tendril develops software applications for seamlessly combining wireless sensor and control networks, while Ember sells wireless chips based on emerging ZigBee technology.

The CIA appears intent on exploring wireless sensor networking. "The next generation of computing will seamlessly network billions of embedded devices," In-Q-Tel CEO Gilman Louie said in a statement.

“Ember is the market leader with a mature platform that has been successfully deployed in a variety of applications around the world," he said. "We believe their technology has great potential to improve the security and efficiency of government and defense operations."

Energy is another hot area for the spy agency. In-Q-Tel's investment in Electro Energy gives it access to advanced battery technologies, while SkyBuilt claims to have developed rugged and mobile energy systems that can use any combination of commercial solar, wind, micro-hydro, diesel and other sources.

Electro Energy on Thursday said it entered into a stock purchase agreement with In-Q-Tel. Under the terms, In-Q-Tel has agreed to purchase 241,692 shares of unregistered common stock and warrants to purchase 75,829 shares of unregistered common stock of the company an exercise price of $3.11 per share.

The total purchase price for the stock and warrants is $800,000 and is expected to be paid over the course of 14 months following the closing. Electro Energy will use the funds to demonstrate the incorporation of Bipolar lithium-ion cell technology into bipolar lithium-ion batteries.

Electro Energy was founded in 1992 to develop, manufacture high-powered, rechargeable bipolar nickel-metal hydride batteries for use in a wide range of applications.

Separately, Electro Energy also announced it is developing a custom-designed prototype battery pack for the Toyota PRIUS+ Test Vehicle, which is the centerpiece of the California Cars Initiative designed to promotethe commercial use and mass production of plug-in hybrid electric vehicles.

On the software front, In-Q-Tel is investing in its more traditional portfolio of security and visualization technologies with FMS and Idelix.

FMS' Sentinel TMS software analyzes and ranks people, transactions, events, and other criteria, assigns relative values to those connections, and develops a dynamic picture of the relationships, according the company.

Idelix&s pliable display technology (PDT) is billed as a tool for information visualization and data fusion.

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