Alphabet Winds Down Mineral: What Went Wrong?
Alphabet Winds Down Mineral: What Went Wrong?
Index
Overview
More Transactions to Come?
Price Paid
What I Got Wrong About Mineral in January 2023
What Were the Challenges Mineral Ran Into?
Constraints and Final Thoughts
Overview
Alphabet Winds Down Mineral, Licenses Ag Technology to Berry Producer Driscoll’s - Bloomberg
Alphabet Inc. is licensing some technology from its agriculture startup Mineral to berry producer Driscoll’s Inc. as it winds down the nascent firm’s operations.
Last year, Mineral graduated from the lab and became an independent subsidiary of Alphabet. But it has struggled to find a sound business model in an industry with fierce competition and slim profit margins, according to four people with knowledge of the matter.
In January 2023, Mineral was officially launched as its own operating division.
Mineral is the agriculture arm of Alphabet’s (Google) moonshot factory initiative— the research and development organization that aims to develop breakthrough technologies to solve some of the world's biggest problems.
More Transactions to Come?
Before diving more into the Mineral business itself, there is a notable line from a Mineral memo that suggests the Driscoll’s licensing isn’t the only story, either (emphasis mine):
“Mineral will no longer be an Alphabet company, and our technology will live on inside of leading agribusinesses where they can have maximum impact.”
Along with this line from Mineral CEO Elliott Grant’s blog (emphasis mine):
Driscoll’s is the first agribusiness to receive Mineral technology, and is a first step towards ensuring that our breakthrough technologies achieve the greatest impact.
“Agribusinesses” as plural, not just “Driscoll’s”, and “the first” implies there will be a second, meaning there are other ag companies that acquired/licensed assets, or will acquire/license assets from Mineral.
Mineral had patents in high value berry crops and row crops as well.
Mineral had been talking to equipment organizations, as alluded in their blog, and brought in someone with extensive equipment industry background to lead product, which suggests that an equipment company could be where other patents, data and capabilities may end up.
According to Google Patents, Mineral has 87 patents (or pending)— including “Analyzing crop fields based on agricultural management practices,” “Determining Cereal Grain Crop Yield Based On Cereal Grain Trait Value(s),” “Using empirical evidence to generate synthetic training data for plant detection” and a host of others. It’s not clear which are valuable or not, but depending on the organization there may be utility in some of them.
Price
The price of the transaction was not disclosed. Given the assets are going to one of Mineral’s customers, it seems unlikely that the price point is significant— Driscoll’s isn’t obtaining Mineral personnel, its customer base or anything else so this is purely an IP-based transaction. That is a curious aspect as well— embedding technical assets into a non-technical organization with no one to manage them makes me wonder about the long term utility and viability of these assets.
What I Got Wrong About Mineral
I wrote about Mineral in January of 2023. There are many poor assumptions I made, but none more questionable than this:
Alphabet only “graduates” these companies once they have proven commercial viability, meaning stand on their own as a successful business unit within the Alphabet business.
This is wrong. What I missed was the trimming of the “fat” in tech companies going on at the time— whether in personnel, wasteful R&D or side projects.
Alphabet’s then CFO, now President and Chief Investment Officer, Ruth Porat had been adamant on “sharpening the focus” within Alphabet— this meant not only job cuts, but minimizing funds for ‘X’ which meant spinning Mineral out was not a signal of commercial viability, but a moment of “sink of swim” for the entity.
This emphasis was reiterated earlier this year as they made known their ambition to raise outside capital to fund spin-outs vs. using their own balance sheet:
We’re expanding our approach to focus on spinning out more projects as independent companies funded through market-based capital….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.
Mineral has been trying to find a commercial fit since they were introduced, without significant success.
What Were the Challenges
Mineral never stated specifically what their business model would be, beyond CEO Elliott Grant talking about ML-as-a-service, or algorithms-as-a-service and I’d heard commentary surrounding being the backbone for agribusiness machine learning across the value chain.