Alphabet’s factory
The strategy relies on a dedicated venture fund that exists solely to invest in X spin-outs, and in which Alphabet is only a minority investor. “If Alphabet was the only LP, the fund would be inside Alphabet, and then when they invested in something from X, it would still be inside Alphabet,” Teller explained on stage. “So Alphabet may be a small LP, but if it’s more than a small LP, we undo what we’re trying to accomplish.”
that background is Series X Capitalwhich has raised more than $500 million and is led by Gideon Yu, former YouTube executive and Facebook CFO. The existence of the fund was first reported by Bloomberg. last year. Unlike Alphabet’s other investment arms: GV, which invests extensively in early-stage startups; CapitalG, which backs growth-stage companies; and Gradient Ventures, which invests in AI startups: Series X Capital is legally required to invest exclusively in companies that emerge from X.
The approach represents a significant evolution for X, which has historically turned successful projects like Waymo and Wing into independent subsidiaries of Alphabet. Teller said the lab has learned over the past decade that while some lunar projects benefit from Alphabet’s resources and scale, others “may go faster and won’t really benefit from being part of Alphabet because they are so different.”
“Landing it just outside the Alphabet membrane, where we can be very close to them, get a lot of strategic benefits from them, but not necessarily control them, makes sense,” he said.
In Disrupt, Teller explained that the spinout strategy only works because of X’s ruthless approach to intellectual honesty, including a culture that actively celebrates the elimination of promising ideas.
X define un proyecto lunar que tiene tres componentes específicos: debe intentar resolver un gran problema en el mundo, proponer algún tipo de producto o servicio que pueda hacer que ese problema desaparezca y aprovechar tecnología innovadora que cree un “rayo de esperanza” de que el equipo dentro de X pueda resolver ese problema. Critically, Teller said, “if someone proposes a moonshot and it seems reasonable, the company is not interested, because that, by definition, would not be a moonshot.”
What happens to ideas that meet these criteria? X tests them mercilessly, looking for reasons to kill them, Teller said. “If you propose something that sounds pretty crazy, that has those three components and is a testable hypothesis, for a small amount of money we can learn something about whether it’s a bit further crazy than we thought, or a little less crazy than we thought,” Teller explained. “If it’s a little crazier than we thought, great, high five, let’s put a bullet in his head and move on.”
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This approach requires separating people from their ideas, which is why Teller said he doesn’t even know who started most of the projects at “If we are going to explore something and you [as the lead inventor] If you feel like ‘this is my baby’, what are the chances that you’ll have to practice real intellectual honesty? he told the Disrupt audience.
In practice, this means that X tackles the most difficult parts of projects first, actively looking for reasons to close them. The result is a brutal 2% success rate that Teller considers not a failure but a characteristic. X ha eliminado muchos más proyectos de los que lanzó, incluidas categorías enteras que alguna vez parecieron prometedoras, como herramientas de inteligencia artificial de redacción publicitaria que los modelos básicos finalmente absorbieron.
All that trial and error can be costly. The spin-off structure solves a practical problem: While
Despite the emphasis on detachment from ideas, X employees have a high stake in the game when projects develop. For those working on projects aimed at independence, the financial incentive is substantial. “You and the rest of your team will get a piece of that company,” Teller said. “It’s about the same as you would have gotten if you had started from your garage at that financing stage, but without taking any risk in the meantime.”
The speech to X’s potential employees is also explicit about this compensation. “Your four or five standard deviation lead will be bigger on the outside, I’ll give you that,” Teller said at Disrupt. “But if you come to X, what you can do is be a card counter of innovation with us, without fear or financial risk to yourself.”
X employees are paid like other Google employees, with no involvement in early-stage projects, because “it’s not even a company; it’s an idea we’re trying to learn about,” Teller explained. This removes the financial pressure that prevents founders from finishing their own ideas. “You can say, ‘Hey, this one isn’t raising our average, let’s throw it out,'” Teller explained. “And since you haven’t bet your kids’ college fund on it, that doesn’t scare you.”
X has created at least two companies by 2025: Taara, which develops wireless optical communication technology, and Heritable Agriculture, a biotech company that uses machine learning to accelerate crop improvement. Previous spin-off companies that raised external funding include Malta (renewable energy storage), Dandelion (geothermal heating) and iyO (AI-powered headsets).
On the eve of Disrupt, X announced his new moonshot venture: Anoria “new artificial intelligence platform to help real estate developers, architecture and construction industries and cities untangle the complexities of new construction projects,” as it describes itself. When asked on stage what makes this particular AI platform a “moonshot,” Teller pointed out the size of the problem and the opportunity.
“The built environment represents approximately 25% of the world’s solid waste, [and] about 25% of the world’s population [carbon dioxide] production. It’s literally on Maslow’s hierarchy of needs: it’s where we live, where we spend most of our time. It is a large part of the world’s GDP production. Therefore, it would be difficult for it to matter more as an industry.”
You can watch our full conversation with Teller herestarting at minute 6:08.
