Alphabet’s X moonshot factory is shifting how it brings ambitious technology projects to market, increasingly spinning them out as independent companies rather than keeping them within the Alphabet corporate structure, X’s head honcho, Astro Teller, revealed at TechCrunch Disrupt this past week.
The strategy hinges on a dedicated venture fund that exists solely to invest in X spinouts, and in which Alphabet is only a minority investor. “If Alphabet was the sole LP, the fund would be inside of Alphabet, and then when they invested in something from X, it would still be inside Alphabet,” Teller explained onstage. “So Alphabet can be a small LP, but if it’s more than a small LP, we undo the thing that we’re trying to accomplish.”
That fund is Series X Capital, which has raised over $500 million and is run by Gideon Yu, a former YouTube executive and Facebook CFO. Bloomberg first reported the fund’s existence last year. Unlike Alphabet’s other investment arms — GV, which invests broadly in early-stage startups; CapitalG, which backs growth-stage companies; and Gradient Ventures, which invests in AI startups — Series X Capital is legally obligated to invest exclusively in companies spinning out of X.
The approach represents a meaningful evolution for X, which has historically graduated successful projects like Waymo and Wing into standalone Alphabet subsidiaries. Teller said the lab has learned over the past decade that while some moonshots benefit from Alphabet’s resources and scale, others “can go faster and won’t really benefit from being part of Alphabet because they’re just so different.”
“Landing it just outside the Alphabet membrane, where we can be very tight with them, get a lot of strategic co-benefit with them, but not necessarily control them, makes sense,” he said.
At Disrupt, Teller explained that the spinout strategy only works because of X’s approach to intellectual honesty, including a culture that actively celebrates killing off promising ideas.
X defines a moonshot as having three specific components: it must attempt to solve a huge problem in the world, propose some kind of product or service that could make that problem disappear, and leverage breakthrough tech that creates a “glimmer of hope” that the team inside X can solve that problem. Critically, Teller said, “if someone is proposing a moonshot and it sounds reasonable, the company isn’t interested, because that, by definition, wouldn’t be a moonshot.”
What happens to ideas that meet these criteria? X tests them ruthlessly, looking for reasons to kill them, Teller said. “If you propose something and it sounds pretty wild, that has those three components, and it’s a testable hypothesis, for a small amount of money, we can learn something about whether it’s a little bit more crazy than we thought, or a little bit less crazy than we thought,” Teller explained. “If it’s a little bit more crazy than we thought, cool, high five, let’s put a bullet in its head and move on.”
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