One of the biggest and ongoing concerns for investors in Alphabet Inc. (NASDAQ:GOOGL) (NASDAQ:GOOG) has been Google's seemingly bottomless pockets when it comes to funding its moonshot projects.

After years of defending its massive research and development budget for these high-risk, high-reward undertakings, Google eventually reorganized into Alphabet, in a bid to provide visibility and transparency into a segment that's now referred to as "other bets." These include self-driving car company Waymo, broadband unit Google Fiber, life sciences division Verily, drone unit Wing, and balloon segment Loon, among others.

Now, Google is taking a fresh approach to help fund some of its most ambitious undertakings, using venture capital funds to alleviate some of the risk.

A self-driving truck and self-driving car driving side by side.

Image source: Waymo.

Along for the ride

Waymo announced on Monday that it raised $2.25 billion in its first external investment round. Initial investors in the self-driving car unit were led by private investment fund Silver Lake, the Canada Pension Plan Investment Board, and Mubadala Investment Co., the sovereign wealth fund of Abu Dhabi. Other contributors included Canadian auto part supplier Magna International, venture capital firm Andreessen Horowitz, car dealer AutoNation, and Alphabet itself. The company didn't disclose Waymo's valuation or the stakes of any of the investors.

"We've always approached our mission as a team sport, collaborating with our OEM [original equipment manufacturers] and supplier partners, our operations partners, and the communities we serve to build and deploy the world's most experienced driver," said John Krafcik, Waymo's CEO. "Today, we're expanding that team, adding financial investors and important strategic partners who bring decades of experience investing in and supporting successful technology companies building transformative products."

More where this came from

Alphabet executives had telegraphed the move to open up the company to outside investors over the past couple of months. In an interview with Fortune earlier this year, CEO Sundar Pichai said the company was at a stage with the "other bets" segment that it could "raise money from outside investors." He went on to say, (emphasis mine) "We expect most of the 'other bet' companies to follow a process like that over time." 

On the company's fourth-quarter conference call, CFO Ruth Porat said in relation to Google's "other bets," "[We're] looking at where it makes sense to work with external capital as we did with Verily." Earlier on the call, Porat revealed a $1 billion investment round in its life sciences segment Verily, led by Silver Lake. This was in addition to $800 million raised from investment company Temasek Holdings.

Driving money to the bottom line

Waymo is by far the most advanced of the company's moonshot projects, which began as the Google Self-Driving Car Project back in 2009 and was spun off into a stand-alone company in 2016. The segment is also the closest to commercial viability, having rolled out its on-demand ride-hailing service to customers in Arizona in late 2018. It's little surprise, then, that the autonomous vehicle segment would draw significant interest in its first trip to the well.

A woman and a teenager sitting in a Waymo minivan.

Image source: Waymo.

No one knows for sure how much Waymo could eventually be worth, but some of the estimates are staggering. Late last year, Morgan Stanley analyst Brian Nowak pegged its value at $105 billion, down from a $175 billion forecast a year ago, since things weren't progressing as quickly as he had expected. In late 2018, UBS analyst Eric Sheridan predicted the segment would book $114 billion in revenue by 2030. 

The potential for a windfall hasn't been lost on Waymo's early investors, and having them onboard makes this self-driving car segment a lot less risky for Alphabet shareholders. Once the money from its ride-hailing and commercial transportation businesses starts rolling in, it could be worth a small fortune to Alphabet, and investors stand to reap the rewards.