Google Preps New Corporate Incubator

The name is a nod to Google’s “20% projects,” the fun stuff that Googlers are supposed to explore in their extra time. Area 120 will enable a handful of Googlers to work on those sort of projects, full-time, the theory goes.

The details of how it work are a little in flux and expected to evolve. But here are the broad strokes:

Google teams will apply to join the incubator full-time for several months, submitting a particular business plan. After that, they’ll get the chance to pitch Google for term sheets for further funding and to establish a new company with Google as an investor.

Area 120—sometimes called just 120—will have a space inside one of Google’s newest San Francisco office buildings. Executives are hoping that it both keeps entrepreneurial employees at Google longer and also stokes big new ideas the company should be working on.

In recent years, Google has watched many fast growing startups slip into rivals’ hands, notably Instagram, founded by a former Googler, and WhatsApp, which Google had its eye on.

And the company remains paranoid about missing the next crop. The creation of Alphabet itself—which is designed to house entrepreneurs like Nest’s Tony Fadell who don’t want to work inside of Google corporate—is trying to do something similar.

An ulterior motive could be evolving 20% time itself, which has gotten cut into as Google leaders have focused more resources into core corporate priorities, trimming back side projects.

But starting an incubator and getting it to work are two different things.

Companies large and small have struggled to make in-house incubators successful due to a simple problem of adverse selection. Today’s most talented entrepreneurs can easily leave and raise money on their own with no strings attached. So those who choose to stay often have less experience or less viable ideas. Then they have had to contend with interference from their parent company, limitations on funding and more.

Google, of course, already has Google Ventures and Google Capital as startup-funding arms to keep entrepreneurial ex-Googlers in the family. It’s unclear if the funds will work with Area 120, which is expected to be funded out of Google's corporate development budget.

Messrs. Harrison and Horowitz have considered recruiting entrepreneurs in residence to mentor the teams, borrowing a models used by Y Combinator and others. Mr. Harrison has worked for years on Google’s corporate development team, and Mr. Horowitz oversaw Google+ before the team disbanded. More recently he’s been running products including “Photos and Streams.”

A Google spokesman declined to comment.