Jyoti Bansal, the founder of software startup AppDynamics, made a difficult decision in 2017 when he chose to sell the company to Cisco for $3.7 billion just days before it was set to go public. Bansal credits the well-being of his employees as a significant factor in his decision, noting that the sale ensured that many of them would become wealthy as a result. Approximately 400 AppDynamics employees saw their shares of the company increase in value to at least $1 million, with some experiencing outcomes of $5 million or more, which Bansal describes as life-changing.
The choice to sell AppDynamics was driven by various factors, including the fit of the startup’s software products within Cisco and the impact a sale would have on the startup’s employees, both culturally and financially. Bansal also considered the financial implications for himself, comparing his own projections for post-IPO growth to Cisco’s valuation of $3.7 billion. He estimated that achieving such a market capitalization would have taken several years, creating risk that he was able to reduce for the benefit of all employees.
Despite initially regretting his decision to sell AppDynamics, feeling lost without a startup to run, Bansal ultimately believes that selling was the right choice based on the information he had at the time. The financial impact of the deal was also significant for him personally, as he owned over 14% of the company. Bansal emphasizes that while the monetary aspect was important to him, the primary driver behind the decision was the well-being of the employees who had contributed to the startup’s success.
Notably, startup founders like Bansal and Jay Chaudhry, founder of Zscaler, who consider the impact on their employees when selling their companies are rare. In Chaudhry’s case, the acquisition of Zscaler by VeriSign resulted in at least 70 of the company’s 80 employees becoming millionaires on paper, with some using their windfall to buy new homes, cars, or take extended breaks to travel. These experiences illustrate the profound effect that such acquisitions can have on employees, transforming their financial situations and opening up new opportunities.
While the decision to sell a startup can be complex, founders who prioritize the well-being of their employees in the process can create lasting positive effects. Bansal’s experience with the sale of AppDynamics highlights the importance of considering the impact on employees when making significant business decisions. By ensuring that employees benefit from the success of the company, founders can create a culture of support and shared success that can have a lasting impact on the company’s overall success and reputation.
