Jyoti Bansal, founder of software startup AppDynamics, made a difficult decision to sell the company to Cisco in 2017 for $3.7 billion. While Bansal would have become wealthy either way, he considered the financial impact on his employees. Roughly 400 AppDynamics employees saw their shares rise in value to at least $1 million, with some experiencing life-changing outcomes. Bansal considered factors such as cultural fit with Cisco and the financial impact on the startup’s nearly 1,200 employees when making the decision.
Bansal compared his post-IPO projections with Cisco’s valuation of AppDynamics to determine which option was financially smarter. He estimated it would have taken three to four years to reach a $3.7 billion market capitalization independently, which would have been a significant risk for all employees. While he initially regretted selling the company, Bansal acknowledges that it was the right decision based on the information he had at the time. The sale was financially significant for him, as he owned more than 14% of AppDynamics.
Startup founders like Bansal don’t always consider the impact on employees when deciding whether to sell their companies. When Jay Chaudhry, founder of Zscaler, sold his company to VeriSign for $70 million in 1998, he didn’t realize the impact on employees until many became millionaires when VeriSign’s stock soared. Chaudhry shared stories of employees buying new homes, cars, and even taking time off to travel around the country. The financial windfall from the acquisition had a significant impact on the lives of employees.
Bansal’s experience highlights the importance of considering employees when making decisions about selling a company. With AppDynamics, he prioritized the financial well-being of his employees and ensured that many benefited from the sale. While he initially had regrets about selling the company, he acknowledges that it was the right decision at the time. Bansal has since gone on to found two other successful software startups, showing that he remains committed to entrepreneurship and creating value in the tech industry.
The story of AppDynamics’ acquisition by Cisco serves as a reminder of the complex considerations that go into selling a startup. Founders like Bansal must weigh financial projections, cultural fit with potential buyers, and the impact on employees when deciding whether to sell. It is rare for startup founders to prioritize their employees in such decisions, making Bansal’s focus on the well-being of his staff notable. Ultimately, the sale of AppDynamics had a significant impact on the lives of many employees, providing them with life-changing financial outcomes.
In conclusion, Jyoti Bansal’s decision to sell AppDynamics to Cisco in 2017 for $3.7 billion was influenced by his concern for the financial well-being of his employees. The sale resulted in significant financial gains for many AppDynamics employees, demonstrating the impact that such decisions can have on a company’s staff. Bansal’s story underscores the importance of considering employees when making decisions about selling a startup, and serves as a valuable lesson for other founders in the tech industry.
