Alphabet's Moonshot Projects: Why They're Spun Out as Companies

Alphabet's X Redefines Technology Project Launch Strategies

Alphabet’s innovation division, known as X, is implementing a revised approach to bringing groundbreaking technologies to the market. Increasingly, ambitious projects are being established as independent entities, diverging from the previous practice of retaining them within the larger Alphabet organizational framework. This shift was detailed by Astro Teller, the head of X, during TechCrunch Disrupt 2025.

Dedicated Venture Funding for Spin-offs

Central to this new strategy is a specialized venture fund dedicated exclusively to investing in companies originating from X. Alphabet maintains only a minority stake in this fund. Teller clarified that a dominant Alphabet investment would effectively keep the spin-offs internally, negating the intended benefits of independence. Therefore, Alphabet’s involvement is intentionally limited.

Introducing Series X Capital

This dedicated fund is called Series X Capital, led by Gideon Yu, a former executive from both YouTube and Facebook, where he served as CFO. The fund has secured over $500 million in funding, as initially reported by Bloomberg last year. Unlike other Alphabet investment divisions – GV, CapitalG, and Gradient Ventures – Series X Capital is legally mandated to invest solely in ventures spun out of X.

A Significant Evolution for X

This represents a substantial change for X, which previously integrated successful projects like Waymo and Wing as independent subsidiaries within Alphabet. Teller explained that over the past decade, X has discovered that while some projects thrive with Alphabet’s resources, others “achieve greater velocity and don’t necessarily require Alphabet’s involvement due to their distinct nature.”

“Positioning these ventures just outside of Alphabet’s direct control, while maintaining close collaboration and strategic advantages, proves to be a sensible approach,” he stated.

Intellectual Honesty and the Culture of Failure

Teller emphasized that this spinout strategy is only viable due to X’s commitment to intellectual honesty, fostering a culture that actively embraces the termination of promising, yet ultimately unviable, concepts.

Defining a "Moonshot"

X defines a “moonshot” project as one that aims to address a significant global challenge, proposes a solution capable of resolving that problem, and utilizes innovative technology offering a “realistic possibility” of success. Teller noted that proposals that appear immediately feasible are dismissed, as they wouldn’t qualify as true moonshots.

Ruthless Testing and Early Termination

Ideas meeting these criteria undergo rigorous testing, with a deliberate focus on identifying reasons for their failure. “If a proposal is audacious and meets these criteria, we test it to determine if it’s even more impractical or surprisingly viable,” Teller explained. “If it proves more challenging than anticipated, we celebrate and discontinue it.”

Detachment from Ideas and Ownership

This process necessitates a separation between individuals and their ideas. Teller admitted he is often unaware of the original creators of projects at X, including prominent examples like Waymo and Wing. He believes that personal attachment hinders objective evaluation. “If you’re deeply invested in an idea, how likely are you to practice genuine intellectual honesty?” he questioned.

A 2% Success Rate – A Feature, Not a Bug

In practice, X prioritizes identifying and addressing the most difficult aspects of projects first, actively seeking reasons to abandon them. This results in a low success rate of just 2%, which Teller reframes as a positive attribute. X has even discontinued entire areas of research, such as AI copywriting tools superseded by foundation models.

This extensive testing and failure can be costly. The spinout structure addresses this by allowing X to systematize the process while maintaining strategic connections.

Employee Incentives and Equity

Despite the emphasis on detachment, X employees benefit significantly when projects spin out. “You and your team will receive equity in the new company,” Teller said. “This is comparable to what you’d receive starting a company from scratch at a similar funding stage, but without any upfront financial risk.”

The Trade-off for Innovation

Potential X employees are explicitly informed of this trade-off. “Your potential upside is greater outside of Alphabet, but at X, you become an innovation ‘card counter’ with no personal financial risk,” Teller explained.

X employees are compensated at the same level as their Google counterparts, without equity in early-stage projects, as these are merely “ideas under exploration.” This removes the financial pressure that can prevent founders from abandoning flawed concepts. “You can objectively assess if a project is performing well and discontinue it without fear of losing your investment,” Teller stated.

Recent Spin-offs and Anori

X has launched at least two companies in 2025: Taara, focused on wireless optical communication, and Heritable Agriculture, a biotech firm utilizing machine learning to accelerate crop breeding. Previous spin-offs that secured external funding include Malta, Dandelion, and iyO.

Prior to Disrupt, X unveiled its latest venture: Anori, an AI platform designed to streamline building projects for real estate developers, architects, and cities. When asked about the “moonshot” nature of this platform, Teller highlighted the scale of the problem and opportunity.

The Impact of the Built Environment

“The built environment accounts for approximately 25% of global solid waste and carbon dioxide emissions. It’s fundamental to human needs and a significant portion of the world’s GDP. Its impact is immense,” he said.

A full recording of the conversation with Teller is available here.