In recent developments, Alphabet’s X Lab, an experimental group known for its ambitious projects like wearable head-up displays, self-driving cars, smart contact lenses, flying Internet balloons, and delivery drones, has been hit with layoffs. According to Bloomberg’s report, dozens of employees have been affected by this downsizing. This marks the 11th layoff announcement from Google in the past year and the fourth one this month.
X Lab, categorized under Alphabet’s “Other Bets” group, focuses on moonshot endeavors and has been grappling with profitability challenges. Although Google hopes that the significant investments made in these projects will eventually generate new revenue streams, the quarterly financial results show a consistent loss, making X Lab a prime target for cost-cutting measures.
The memo obtained by Bloomberg reveals that X Lab CEO Astro Teller plans to adopt a new strategy. The aim is to spin off more projects as independent companies that can secure funding from market-based capital. By expanding collaborations with a wider range of industry and financial partners and emphasizing lean teams and capital efficiency, Google intends to shift the burden of funding these projects to external sources.
This approach of seeking external funding is not unprecedented for some of Alphabet’s successful “Other Bets” initiatives. For instance, Waymo, the self-driving car company, raised substantial external funding in 2020 and 2021, accumulating over $5 billion. Verily, Alphabet’s health care data analytics company, has also secured billions in outside investments. These groups initially emerged as X Lab projects before transitioning into fully-fledged Alphabet companies. Similarly, projects like Project Loon (Internet balloons) and Sidewalk Infrastructure Partners (infrastructure planning) were either X Lab or Alphabet ventures that eventually became independent entities separate from Alphabet’s financial reports. Alphabet intends to guide X Lab projects down either of these two paths.
While seeking outside funding may subject these projects to increased scrutiny, the Bloomberg report highlights that Alphabet’s capacity to accommodate numerous “Other Bets” projects has created a bottleneck for X Lab ventures ready to progress. Startups within X Lab have often faced the dilemma of either waiting for an opening within Alphabet or striking out on their own.