Maybe it's the innate libertarian in me, but there is something that creeps me out about the CIA running a venture capital firm.

In-Q-Tel is a private, nonprofit organization created in 1999 to seed and fund start-ups and technologies that meet the intelligence community's needs -- and make taxpayers a profit in the process.

You can't say the government doesn't have a sense of humor (okay, yes you can). The creators of In-Q-Tel named it after the James Bond character "Q," who was forever designing ingenious gadgets, such as exploding pens and stun-gun-equipped Ericsson (NASDAQ:ERICY) mobile phones, for the dapper spy.

The company gets an annual taxpayer-backed budget of about $30 million to fund companies and technology, with any resulting profits plowed back into its operations. Typically it invests anywhere from $500,000 to $3 million in a company, with most in the area of $1 million to $1.5 million.

After reviewing business plans from more than 4,100 companies, it has ultimately invested in 60 or so, including Convera (NASDAQ:CNVR), a multimedia search technology company, Nanosys, whose IPO was just recently pulled, and Pixlogic, a visual search start-up that scans video for people or events. Some 35 are still in its "active portfolio," and it continues to field new opportunities to endow.

In-Q-Tel snatched up some leading business lights to get itself kick-started. The CEO is Gilman Louie, former chief creative officer at Hasbro's (NYSE:HAS) interactive division, and Norman Augustine, former CEO of Lockheed Martin (NYSE:LMT), sits on the board of directors. Government experience was not a prerequisite to working at In-Q-Tel, and most of the employees at the company don't work for The Company either. In fact, most of the 50 people don't even have security clearances, and its operations are free of the CIA's normal strictures. It can establish joint ventures, fund grants, and award sole contracts all without CIA approval.

In essence, it stands on equal footing with private venture capitalists. Yet where venture capitalists look for an exit strategy, In-Q-Tel doesn't plan on going away. Almost like being married to the mob.

Which is where part of my unease with this organization comes in. Coming from law enforcement as well as living in a post-Sept. 11 world, I'm interested in our country being as safe as possible. I assuredly want our intelligence agencies to have the best means available to effectively prevent future tragedies. Yet In-Q-Tel is not only the government competing with the private sector; it's in bed with it as well. The thought of men in black investing in commercial technology -- or determining which technology gets the green light -- raises the hackles on my neck. While thinking that they might focus most of their efforts on tracking terrorists and anticipating their next moves does assuage some of my concerns, it remains tax dollars funding private companies.

No, we're not getting missile-equipped BMWs or magnetic, blade-enhanced Rolexes for our tax dollars, a point I'm sure Desmond Llewelyn -- the real Q -- would find disappointing, but In-Q-Tel's collaboration with the private sector does give new meaning to the word "spooky."

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Motley Fool contributor Rich Duprey thinks that government is best that governs least. His opinions are his own opinions and do not necessarily represent the opinions of The Motley Fool. He does not own any of the stocks mentioned in this article.