Jyoti Bansal, the founder of software startup AppDynamics, made a difficult decision in 2017 when he opted to sell the company to Cisco for $3.7 billion, just days before it was set to go public. He made this decision with his employees in mind, wanting to ensure that they would all benefit financially from the sale. Roughly 400 employees saw their shares in the company rise in value to at least $1 million after the sale, with some experiencing life-changing outcomes.
The decision to sell came down to multiple factors, including how AppDynamic’s products aligned with Cisco’s offerings, as well as the impact a sale would have on the startup’s culturally and financially. Bansal also compared his own projections for the company post-IPO to Cisco’s valuation, ultimately determining that selling was the smarter monetary choice. Reaching a $3.7 billion market cap would have taken several years of execution, which he believed was reduced through the sale, benefiting all employees at the company.
After the sale, Bansal experienced regret, feeling that he could have continued to grow AppDynamics. However, he acknowledges that, based on the information he had at the time, selling was the right decision. The financial impact was significant for Bansal personally, as he owned over 14% of the company. Today, he is the CEO and co-founder of two other software startups, Traceable and Harness, with Harness being valued at $3.7 billion in 2022.
It is uncommon for startup founders to take their employees into consideration when deciding whether to sell their companies, making Bansal’s decision notable. When cloud cybersecurity firm Zscaler was acquired by VeriSign for $70 million in 1998, founder Jay Chaudhry did not realize how impactful the sale would be for his employees until he saw the reaction at a company-wide celebration. At least 70 of the 80 employees became millionaires on paper when VeriSign’s stock rose two years later, allowing them to make significant lifestyle changes.
Being mindful of employees during such pivotal moments is crucial for maintaining a positive company culture. By ensuring that employees benefit from the success of the company through events like acquisitions, founders can create a loyal and motivated workforce. This approach can lead to increased productivity, employee satisfaction, and overall success for the business. Ultimately, putting employees first can have long-lasting benefits beyond just financial gain.
