In the tech industry, Google (now named Alphabet Inc.)is known for its vision, innovative products and services, as well as its rigorous approach to product development and making acquisitions. One of the key principles that drives Google’s product development process is the “Toothbrush Test,” which was first proposed by its co-founder, Larry Page.
The Toothbrush Test is a simple yet effective way to evaluate the potential of an acquisition. According to the test, it should be something that people use at least twice a day, like a toothbrush, in order to be considered valuable and worthwhile to acquire.
The idea behind the toothbrush test is that people are more likely to use and benefit from products and services that they use on a regular basis. This means that products and services that pass the Toothbrush Test have the potential to be more successful and impactful than those that do not.
In the tech sector, competition is fierce, and the pace of innovation is rapid.The Toothbrush Test can help companies focus their efforts on potential acquisitions that will make a big difference to their business. It can help companies avoid investing in acquiring businesses that will not move the needle much in the long term.
In recent years, the Toothbrush Test has become increasingly popular in the tech sector, with many companies adopting it as a way to evaluate the potential value of not only acquisition opportunities but also their own products and services.
When considering making an acquisition, M&A advisors bring an independent, external and non-emotional view on the opportunity. This tempers the level of excitement and anticipation of founders and boards.