In-Q-Tel, the CIA’s Investment Arm, Quietly Backing Seventh Sense Biosystems

8/5/10

Few people know that In-Q-Tel, the nonprofit investment arm of the U.S. intelligence community, has a stake in the Cambridge, MA-based startup Seventh Sense Biosystems. Neither In-Q-Tel nor Seventh Sense has ever publicized their relationship, which came to Xconomy’s attention recently.

Arlington, VA-based In-Q-Tel—which invests in lots of startups with technologies that could aid the mission of the CIA and other U.S. security and defense agencies—was a silent participant in Seventh Sense’s $4.75 million Series A funding round back in 2008, company co-founder and CEO Doug Levinson said. Levinson declined to say why the CIA’s venture arm is backing his firm, which is developing a device that can be worn on the skin like an adhesive bandage and painlessly draws blood samples for use in medical diagnoses. He says he’s bound by an agreement with In-Q-Tel that only allows him to say that the group has invested in his company.

Simon Davidson, the partner at In-Q-Tel’s Waltham, MA, office that led the group’s investment in Seventh Sense, also wouldn’t say anything about the investment. He deferred comment to Lisa Bader, his group’s manager of external affairs, who replied to my inquiry via e-mail to say that In-Q-Tel would not discuss the terms of its investments. But she did confirm that the group made a “strategic investment” in Seventh Sense in July 2008. Some of the group’s better-known investments in the Boston area were made in BBN Technologies (now part of Raytheon), QD Vision, and Spotfire (now part of Tibco Software).

Seventh Sense has previously disclosed that its venture investors include Cambridge-based Flagship Ventures, Polaris Venture Partners of Waltham, and Boston’s Third Rock Ventures. Seventh Sense’s Levinson is also a partner at Flagship, where the startup was formed to fulfill his vision of making monitoring a person’s health as simple as looking at a car’s “check engine” light. For the past several years, Levinson has focused on starting companies that improve people’s ability to deliver sophisticated diagnostic results outside of traditional laboratories.

In fact, In-Q-Tel invested in Levinson’s previous diagnostics company, T2 Biosystems, which named the CIA’s venture group among the backers in its $10.8 Series B funding round in October 2008. Unlike In-Q-Tel’s investment in Seventh Sense, the group disclosed that it had backed Cambridge-based T2 because the firm’s portable diagnostic machines to find ways to deploy the technology in the field for the country’s intelligence community.

Levinson told me that he was In-Q-Tel’s early contact at T2, where he was previously the chief executive, and the group’s investment in that company was made as he was transitioning to Seventh Sense. “They approached me initially about T2, and then we ended up talking about both companies,” he said.

It’s unclear exactly what use of Seventh Sense’s technology In-Q-Tel foresees in the intelligence community. In-Q-Tel’s Bader, in her e-mail, kept her group’s interest in the company artfully vague. “Seventh Sense is developing some interesting technologies, and we are pleased to be working with the company as they explore these emerging applications,” she wrote.

Still, Seventh Sense appears to fit the bill for the type of company that 11-year-old In-Q-Tel intended to invest in when it opened its Waltham office in 2007. At the time, In-Q-Tel partner Ben Levitan told us that the Boston-area office would help his group keep closer tabs on the entrepreneurial activity around the academic centers in the region. Seventh Sense is a firm that formed with the help of scientific co-founders Bob Langer, the prolific MIT inventor, and Rox Anderson, a renowned Harvard Medical School professor and director of the Wellman Center for Photomedicine at Massachusetts General Hospital.

As we first reported in May, Seventh Sense is developing a so-called touch activated phlebotomy (TAP) device. The idea is to give patients a small device that sticks to the skin and painlessly draws blood when they push a button on it. The device could have various embedded diagnostic systems that enable the blood to be analyzed for multiple health conditions on the spot. Levinson has said the idea is to make the devices tiny and unobtrusive, perhaps as small as four quarters stacked together.

Levinson says that his firm plans to raise an undisclosed amount of funding in a Series B round before the end of 2010. The startup quietly raised $1.5 million in a debt and rights funding deal in May. Lighthouse Capital Partners, the venture debt specialist with offices in California and Cambridge, MA, provided the funding for that deal, which was an extension of the startup’s Series A round, Levinson says.

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