The Alphabet-controlled innovation lab, X, is in the news again, due to their ambitious strategy of producing “moonshot” projects. This endeavor includes a clear plan to address some of the world’s greatest challenges with breakthrough technologies. X has a famously low hit rate—only 2% of its projects pan out. This strategy might initially sound like an ice-cold idea, the leadership touts it as an amenity, not an adversary.
According to Astro Teller, the CEO of X (formerly known as Google X), their motto is a demanding and scientific process of testing. Under this framework, the search for reasons to kill projects comes first, with little motivation to develop and support them. By prioritizing the most challenging aspects of initiatives first, X aims to determine the viability of its efforts early on.
The defining characteristics of a moonshot project at X revolve around three core components: it must address a significant problem, propose a viable product or service, and harness breakthrough technology. This methodology has equally successfully spun out multiple other companies including Taara and Heritable Agriculture. Last week, X announced its newest initiative, Anori.
In addition to these recent examples, X has spun out a wide variety of other companies including Waymo, Wing, Malta, Dandelion and iyO. Each of these entities have developed out of X’s peculiar operational model. Their model minimizes financial risk while maximizing the potential for innovation.
To better deploy its investment strategy, X also operates Series X Capital — an in-house, dedicated corporate venture fund — which has raised more than $500 million. Led by former Facebook CFO Gideon Yu, Series X Capital aims to invest in the next generation of up-and-coming companies. Yu, a former YouTube exec who served as CFO of Facebook, leads this mission with gusto. Alphabet’s own stake in this venture fund is, perhaps surprisingly, a minority one.
X tends to focus heavily on the built environment. It is responsible for an estimated 25% of the world’s solid waste and carbon dioxide emissions. Teller emphasizes the importance of this sector by stating that it “is literally on the Maslow’s hierarchy of needs — it’s where we live, where we spend most of our time.” He notes that solving problems in this sector is especially important considering it makes up 60 percent of the global economy.
X’s unique spinout structure makes it easier to attract outside venture capitalists. This tactic provides cover for them to obtain controlling interests in these newly profitable companies. Teller elaborates on how this process enables leapfrogging ideas to thrive without the weight of financial pressures that typically come with great idea execution. One of the lab’s directives requires a separation from your own attachment to a project. Indeed, Teller says many times he doesn’t know who started all of the current or most projects at X.
When you’re trying to advance one of those wilder ideas, help yourself out by keeping those three critical elements in mind. They can let you know whether the new concept is crazier than we thought or somehow more practical than anticipated. Teller explains regarding their testing philosophy.
He further elaborates on their commitment to intellectual honesty: “If you come to X, what you get to do is be a card counter of innovation with us, with no fear and no financial risk to yourself.” This independence gives teams the ability to look candidly at projects without the emotional baggage of personal stakes.
Teller highlights that if a project fails to meet expectations during the testing phase, they are not hesitant to discard it. “You can say, ‘Hey, this one’s not pulling our average up, let’s throw this one away,’” he states confidently.
That really challenging framework and ethos informs all of our decisions. In fact, if a moonshot proposal sounds perfectly reasonable or conventional, X probably won’t fund it. “If someone is proposing a moonshot and it sounds reasonable, the company isn’t interested, because that, by definition, wouldn’t be a moonshot,” Teller emphasizes.
By putting these ventures just outside Alphabet’s direct control — but not too far — enables a strong partnership, strategic alignment, and great collaboration while protecting operational independence. Teller notes that landing projects just outside the “Alphabet membrane” facilitates beneficial partnerships without compromising independence: “Landing it just outside the Alphabet membrane… makes sense.”