Do you want to buy a startup? You can only do this if its criteria match the toothbrush test. The strange and esoteric criterion was floated by Google's Larry Page: Is it something you'll use once or twice a day that will make your life better? If yes, it's done. A move that takes away the old criteria for evaluating a group, such as revenues and sales. Mountain View favors utility over profitability, long-term potential over short-term growth.
In addition to this - writes the New York Times - the toothbrush test launched by Page highlights another big change: Silicon Valley groups are increasingly becoming independent from investment banks in terms of acquisitions and mergers. The examples are many. Google, Facebook, and Cisco are increasingly relying on in-house teams to set goals, conduct due diligence, and set terms of deals, leaving Wall Street at the door.
“Larry will be looking at potential deals in the early stages – told the New York Times, Donald Harrison vice president of business development at Google – banks can be useful, but they are not the central point of the discussion». The trend to leave Wall Street out of the picture is growing rapidly. In 2014, 69% of technology acquisitions in America (worth $100 million) went without banks. Just ten years ago the number was 27%, according to Dealogic data cited by the New York newspaper.
