Alphabet Inc.’s X research lab, which incubated Waymo and the Wing delivery drone venture, is reportedly letting go of dozens of employees.

Bloomberg reported the job cuts today, citing people familiar with the matter and an internal memo. The move is believed to be part of a restructuring effort focused on streamlining the process through which X research projects spin out into independent startups. Waymo, Alphabet’s autonomous vehicle division, began as an X project in 2009 and spun out into an standalone business unit seven years later.

The lab also launched many other research initiatives over the years. One focused on building domestic robots, while another saw X researchers develop salt-based energy storage equipment. One of the lab’s newest spinoffs is using artificial intelligence to ease the installation of industrial automation systems in factories.

When a project graduates from X, it often becomes an independent business unit under Alphabet’s Other Bets revenue segment. However, that graduation process is reportedly slow because the Other Bets segment can only accommodate a limited number of ventures. According to Bloomberg, new projects have to wait until a spot opens. 

Alphabet staffers can also commercialize an X project by turning it into an independent startup that operates outside the Other Bets umbrella. However, that approach was reportedly challenging in the past. According to today’s report, the restructuring initiative at X is meant to streamline the process of turning research projects into independent startups.

Alphabet is expected to partner with external investors on the effort. In particular, the goal is to provide X spinouts with venture capital they can use to commercialize the technology they created at the research lab. Alphabet has reportedly held talks with private equity firms, family offices, sovereign wealth funds and companies that operate in the same segments as its spinoffs.

“We’re expanding our approach to focus on spinning out more projects as independent companies funded through market-based capital,” X head Astro Teller told employees in an internal memo. “We’ll do this by opening our scope to collaborate with a broader base of industry and financial partners, and by continuing to emphasize lean teams and capital efficiency.”

Several X spinoffs have raised funding from external investors in recent years. In 2021, Waymo raised $2.5 billion from a consortium that included parent Alphabet, Silver Lake, Andreessen Horowitz and over a half dozen other backers. More recently, X life sciences spinoff Verily secured $1 billion in a round that likewise included the participation of both Alphabet and external backers.

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