In-Q-Tel has scaled up French start-up Prophesee. Who is the US venture capital fund linked to the CIA and how it moves in Europe to contain Chinese investments in artificial intelligence. Giuseppe Gagliano's insight
In-Q-Tel would have scaled the French start-up Prophesee, says the newspaper Les Echos, which would represent a first in France for the financial arm of the CIA. An example that illustrates how this venture capital fund is becoming increasingly active outside the United States, and particularly in Europe, to counter China.
Some CIA money in the French start-up ecosystem? The French company in question, Prophesee, produces artificial retinas with artificial intelligence capable "of perceiving things that a traditional camera cannot". This Parisian start-up, founded in 2014 and which has partnered with giants such as China's Huawei and Japan's Sony, would be In-Q-Tel's first known investment in France. The investment would have been made a few years ago, the French newspaper suggests, but it has never been made public by Prophesee, nor by the CIA fund. Even today, the two sides refuse to confirm the reality of the investment.
It wouldn't be the first time that In-Q-Tel has secretly invested in a start-up. In 2016, Chris Darby, the CEO of the American fund, admitted that out of a total of more than 310 investments since 2001, there were about a hundred that had never been made public, recalls the Wall Street Journal.
But the interest of the CIA investment fund in French companies is known. In 2020, the French military even had to call in its own investment fund – Definvest – to help prevent In-Q-Tel from entering the capital of Preligens, a specialist in analyzing geolocation data for intelligence and the defense sector, Le Figaro told at the time.
France is not the only European country targeted by the US venture capital fund. The latter entered the capital of Spanish, British, Finnish and even German start-ups. The American fund therefore bet on Iceye, a Finnish company specializing in the construction of microsatellites, on CounterCraft, a Spanish company specializing in cybersecurity, or on Toposens, a German manufacturer of 3D sound sensors.
In all, In-Q-Tel has officially acquired stakes in fifteen European start-ups. And that's not counting the investments kept secret. Indeed, historically, In-Q-Tel was founded both to exploit innovations conceived in Silicon Valley and to finance American start-ups in sectors that the CIA deemed critical for the United States, says John T. Reinert, American lawyer author of one of the rare studies dedicated to the investment strategy of In-Q-Tel published in 2013.
In the late 1990s, the CIA was faced with a double dilemma: its budget had been severely reduced since the end of the Cold War, and the agency watched Silicon Valley become a global innovation mecca, without be able to benefit from it. Hence the idea of creating an investment fund in 1999 on the model of someone who financially supported the beginnings of all these trendy start-ups in California. With one difference: In-Q-Tel does not have to make a profit and operates 100% with public money.
To give confidence to young entrepreneurs, the CIA has appointed Gilman Louie, a businessman who has nothing to do with espionage, as head of In-Q-Tel. His main achievement was to import into the United States a Soviet video game called… Tetris.
In-Q-Tel was immediately seen as a very promising tool by the US administration. Already in June 2001, a report by the independent organization Business Executives for National Security - which brings together business leaders responsible for thinking about national security issues - concluded that this investment fund "allowed the CIA to rapidly identify emerging technologies that could have an impact on your business.”
But success is controversial. In-Q-Tel is best known to the general public in the United States for being an early investor in Palantir, the big data big brother famous for providing electronic surveillance tools to law enforcement agencies.
Chris Darby, who took over as CEO of In-Q-Tel in 2006, has repeatedly defended the investment fund's action, claiming its partnerships with start-ups had saved lives. For example, he had explained how the work of an American company specialized in the analysis of chemical residues present in carpets and supported by In-Q-Tel had allowed the army to equip devices capable of detecting the presence of dangerous chemicals in Afghanistan or Iraq. This financial structure doesn't just give the CIA the benefit of Silicon Valley's creative windfall. Heading a budget of just over $100 million a year, she also seeks to emerge champion in strategic areas in the eyes of American spies.
This is how the first investments concerned start-ups operating in the field of satellites, recalls the lawyer John T. Reinert in his study on In-Q-Tel. They then turned to data analytics and storage, as well as artificial intelligence.
Today, “the big problems are quantum computing, 5G communications infrastructure, microprocessors, and especially biotechnology,” Chris Darby told Congress in 2020.
A priority list identical to that of the Chinese. And it's not a danger. "The competition among the great powers for who will extend their influence around the world depends on a country's ability to be technologically dominant," said Chris Darby. Hence the idea of In-Q-Tel to start investing even outside the American borders, where China was already increasing the number of start-up acquisitions. The opening of the investment fund's first branch in London was decided in 2018, just as former US President Donald Trump launched his trade war against Beijing.
A year later, another branch was opened in Australia, a country at the center of the US-China struggle for influence in the Pacific. “This strategy is a way to counter the Chinese threat in high technology,” says Les Echos. In-Q-Tel would feel invested with a mission: to offer an American alternative, faced with the Chinese windfall, to European or Australian start-ups.
The case of French start-up Prophesee perfectly illustrates this investment battle. Indeed, the Chinese are also interested in this company, since the Sinovation fund and the Chinese smartphone manufacturer Xiaomi took a stake in July 2021.
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