Alphabet’s X moonshot factory is changing the way it brings ambitious tech projects to market, increasingly promoting them as independent companies rather than keeping them within Alphabet’s corporate structure, X head honcho Astro Teller revealed at TechCrunch Disrupt last week.
The strategy is based 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 Alphabet, and then when they invested in something from X, it would still be inside Alphabet,” Teller explained on stage. “So Alphabet can be a small LP, but if it’s more than a small LP, we negate what we’re trying to achieve.”
This fund is Series X Capitalwhich has raised over $500 million and is led by Gideon Yu, a former YouTube executive and Facebook CFO. Bloomberg first reported the existence of the fund last year. Unlike Alphabet’s other investment arms — GV, which invests broadly in early-stage startups. CapitalG, which backs early-stage companies; and Gradient Ventures, which invests in AI startups — Series X Capital is legally bound to invest exclusively in X-derived companies.
The approach represents a significant evolution for X, which has upgraded historically successful projects like Waymo and Wing to stand-alone Alphabet subsidiaries. Teller said the lab has learned over the past decade that while some moonshiners 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 right outside the Alphabet membrane, where we can be very tight with them, have a lot of strategic co-benefits 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 ruthless approach to intellectual honesty, including a culture that actively celebrates the killing of promising ideas.
X defines a moonshot as having three specific elements: it must try to solve a huge problem in the world, propose some kind of product or service that could make that problem go away, and leverage breakthrough technology that creates a “manifestation of hope” that the team inside X can solve that problem. Critically, Teller said, “if someone suggests a moonshine and it sounds reasonable, the company doesn’t care, because that, by definition, wouldn’t be moonshine.”
What happens to ideas that meet these criteria? X tests them mercilessly, looking for reasons to kill them, Teller said. “If you propose something and it sounds really wild, it has these three components, and it’s a controlled case, for a small amount of money, we can learn something about whether it’s a little more crazier than we thought, or a little less crazier than we thought,” Teller explained. “If he’s a little crazier than we thought, fine, high five, let’s put a bullet in his head and move on.”
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That approach requires taking people away from their ideas, which is why Teller said he doesn’t even know who started most of the projects at X, including Waymo, the self-driving car company, and Wing, the drone delivery company that now drops off Walmart packages in about six U.S. cities. “If we’re going to explore something, so are you [as the lead inventor] you feel like ‘this is my baby’, what are the chances of me getting you to practice real spiritual 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 end them. The result is a brutal 2% success rate which Teller frames not as a failure but as a feature. X has killed far more projects than it has started, including entire categories that once looked promising, such as text AI tools that eventually absorbed the core models.
All this trial and error can be costly. The spinout structure solves a practical problem: Whereas X previously had to find outside venture capitalists willing to take at least 51% of a business to spin out from Alphabet, creating a fund that “deeply understands us” and is “legally bound to only invest in things that come from us,” Teller said, X can systematize the strategic spinout process by maintaining close relationships.
Despite the emphasis on moving away from ideas, X’s employees have an important role to play when projects unfold. For those working on projects headed toward independence, the financial incentive is important. “You and the rest of your team are going to get a piece of this company,” Teller said. “It’s about what you’d get if you started out of your garage at that stage of funding, but without taking any risk in between.”
The proposition to potential X employees is clear for this exchange as well. “Your four or five standard deviation upside is going to be bigger on the outside, I’ll grant you that,” Teller told Disrupt. “But if you come to X, what you have to do is be an innovation counter with cards with us, without fear and financial risk to yourself.”
X employees are paid like other Googlers, with no equity 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 killing their ideas. “You can say, ‘Hey, that doesn’t raise 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 created at least two companies in 2025: Taara, which develops wireless optical communication technology, and Heritable Agriculture, a biotech company that uses machine learning to speed up crop reproduction. Previous spinouts that have raised external funding include Malta (renewable energy storage), Dandelion (geothermal heating) and iyO (artificial intelligence headphones).
On the eve of Disrupt, X announced their new moonshot company: Anoria “new AI platform to help real estate developers, the architecture and construction industries, and cities untangle the complexities of new building projects,” as she describes it. Asked onstage what makes this particular AI platform “moonlight,” Teller pointed to the magnitude of the problem — and the opportunity.
“The built environment is about 25% of the world’s solid waste, [and] about 25% of the world [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. So it would be difficult for it to be more important as an industry.”
You can watch our entire conversation with Teller herestart at 6:08 minute.
