Google’s conversion to Alphabet highlights far-flung operations in biotech, venture capital funding

By Steve Brachmann
August 18, 2015

Google

“Google Around the World Background” by C_osett. Public domain.

Google Inc. (NASDAQ:GOOG) is a major consumer technology developer and Internet services giant which is involved in an incredibly diverse array of innovative tech fields. The company is best known for its Internet search engine, which processes an average of about 40,000 search queries every second, but in our Companies We Follow series  we’ve seen them develop everything from robots with humanoid personalities to medical emergency response drones. We’ve covered Google acquisitions that have pulled the company into the sphere of digital wallet tech as well as patenting activities in the field of autonomous vehicles. It’s clear that the tentacles of the corporate octopus that is Google stretch wide and far away from each other.

On Monday, August 10th, Google announced in an official company blog post titled “G is for Google” that it would be undergoing a major corporate restructuring, folding itself into a new corporation called Alphabet Inc. In this new corporate configuration, Google will become a wholly-owned subsidiary of Alphabet and will be led by Sundar Pichai, currently the product chief for Google Inc. Larry Page and Sergey Brin, Google’s original co-founders, will be moving up to Alphabet to serve as CEO and President, respectively. The Google division will still retain many of the corporation’s Internet properties, such as Android and YouTube.

The move has been marketed as a means by which Google can remain more innovative insofar as it allows Page and Brin, who have a penchant for supporting idealistic research & development programs, to continue to make technological bets that have long odds while affecting search engine revenues less. Splitting Google stock into two new classes named GOOGL and GOOG and slimming down Internet services into a single division isn’t expected to change actual business operations so much as placate shareholders and Wall Street investors.

All of the other divisions remaining under the Alphabet umbrella, as many as 80 by some counts, are sectors where it is hoped that R&D development will continue while they grow into services with the billion+ level of users claimed by Google’s Internet services. Perhaps the most recognizable sector of Alphabet outside of the Google division is Nest, a developer of smart home thermostats which is expanding to develop a number of Internet-connected home appliances like smoke alarms and home surveillance cameras. Some believe that Nest’s performance after the corporate restructuring will go a long way in determining whether the Alphabet structure is ultimately successful; the move is being touted as a way to capitalize on fringe bets and Nest may be the division closest to making major strides in a consumer market which is hungry for an Internet of Things. Nest CEO Tony Fadell has reportedly remarked about his vision of the “Jetson’s home” that could be made possible by the company.

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Google X perhaps represents the riskiest of the Alphabet divisions that has been culled from the previous Google fold. This division is a private innovation lab directed by scientist Astro Teller which has an exceptionally high tolerance for accepting failure. Autonomous vehicles and Google Glass are two Google X projects with which readers will likely be familiar but the laboratory has also worked on contact lenses which can monitor glucose as well as Project Loon, an initiative that seeks to bring the Internet to geographically isolated areas by floating a series of Internet-connected balloons in the stratosphere. Other Google X programs include Project Wing, in which Google is working closely with NASA researchers to develop a complex delivery network using drones.

Both Google Ventures, an investment firm interested in targeting tech startups, and Google Capital, a growth equity investment fund operated by Google, will have their own separate divisions under the Alphabet umbrella. Many startups funded by Google Ventures have gone on record saying that they do not expect the Alphabet restructuring to have much effect on business as usual. Near the end of July, Google Ventures took part in a $60 million round of venture funding for Secret Escapes, a members-only luxury travel company. One Google Ventures-funded firm, Rocana of Boston, MA, unveiled a product near the end of July known as Rocana Ops, which is designed to give IT administrators the tools necessary to effectively monitor infrastructure and application security for global operations. Google Capital, which typically picks later-stage investments than the startups funded by Google Ventures, was recently involved in a $90 million round of funding for Indian-based healthcare information provider Practo, which seeks to connect consumers to doctors and specialists. Google Capital has also recently made a $100 million investment in CrowdStrike, a developer of malware protection systems headquartered in Irvine, CA.

Another Alphabet division that will likely benefit from the ability to operate on its own is Google Fiber, a series of fiber optic telecommunication networks operating in a limited series of cities across the United States and offering Internet connectivity speeds of up to one gigabyte per second as well as television and streaming video services. The fiber optic service is rolling out in nine American cities, the most recent of which is San Antonio, TX. In the coming months Google Fiber will likely deal with challenges from competing products developed by rivals like Verizon Communications Inc. (NYSE:VZ) and the Comcast Corporation (NASDAQ:CMCSA). Comcast’s Gigabit Pro claims speeds of up to twice what Google Fiber can provide and Verizon is developing technology that would allow its FiOS network to operate at speeds up to 10 times what Google Fiber offers.

As if this diversity in corporate operations wasn’t enough, Alphabet will also have a division operating whose essential goal is to cure death. Calico is a research organization employing scientists in the fields of medicine, genetics and molecular biology to develop effective treatments that slow aging or fight back against age-related diseases. It’s speculated that Calico perhaps received more than $1 billion in funding during 2014. Near the end of July, Calico entered into an agreement with consumer genetics firm AncestryDNA to explore the genetic effects of human heredity on lifespan; in April, Calico formed a similar partnership with the Buck Institute for Research on Aging, located in Novato, CA, which established Calico operations directly at the Buck Institute’s facilities. Readers with an interest in intellectual property licensing might be piqued to know that back in March, Calico licensed tech developed at the University of California San Francisco. The technology focuses on biologic mechanisms for modulating Integrated Stress Response (ISR), a cellular-level process which can have deleterious effects on a person’s memory.

Although there aren’t many, there are some casualties of the corporate restructuring process that won’t be sticking around with Google once its transformation is complete. One such operation is Niantic Labs, the developer of location-based mobile game Ingress, which has been downloaded more than 12 million times. The game, which pits players in a battle to earn the most check-ins for local businesses, will now be developed by an independent Niantic which will not be covered under the aegis of Alphabet.

The restructuring of Google into the Alphabet corporate umbrella should be finalized by the fourth quarter of 2015, when the company’s quarterly earnings report will be updated to more clearly reflect the finances of Google and other Alphabet divisions. Investors have already shown themselves to be pretty happy with the switch as Google added $20 billion to its market capitalization during the immediate aftermath of its announcement. It will be interesting to see if this shift manages to have much effect on how Google operates within the consumer tech market in the coming years.

The Author

Steve Brachmann

Steve Brachmann is a freelance journalist located in Buffalo, New York. He has worked professionally as a freelancer for more than a decade. He writes about technology and innovation. His work has been published by The Buffalo News, The Hamburg Sun, USAToday.com, Chron.com, Motley Fool and OpenLettersMonthly.com. Steve also provides website copy and documents for various business clients and is available for research projects and freelance work.

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