When Jyoti Bansal, 46, decided to sell his startup AppDynamics for billions, he had his employees in mind. In 2017, just days before AppDynamics was set to go public, Cisco offered to acquire the company for $3.7 billion. As the founder and chairman, Bansal stood to gain significantly either way, but only one option ensured a substantial financial outcome for many of his staff.
Upon accepting Cisco's offer, approximately 400 AppDynamics employees saw the value of their shares soar to at least $1 million each, according to a spokesperson for Bansal. "We had dozens of employees with $5 million-plus outcomes. These are life-changing outcomes," Bansal told CNBC Make It.
Bansal's decision to sell was influenced by several factors, including the compatibility of AppDynamics' software products with Cisco's portfolio and the impact the sale would have on the company's nearly 1,200 employees, both financially and culturally.
He also weighed Cisco's valuation of AppDynamics against his post-IPO projections, estimating that achieving a $3.7 billion market cap would have required "three to four years of great execution," along with the associated risks. By selling, he believed he minimized that risk for his employees and created significant financial benefits for them.
Although Mr Bansal later regretted the decision, feeling he could have continued to grow AppDynamics and experienced a sense of aimlessness without a startup to lead, he still believes it was the right call given the information he had at the time. He has since moved on to co-found two other software companies, Traceable and Harness, the latter of which was valued at $3.7 billion in 2022.
The sale was also a significant financial milestone for Bansal himself, who owned more than 14% of the company at the time, according to an SEC filing. "As the founder, it was much more than life-changing money for me, personally," Bansal said. "The biggest factor for me was our employees."
Reflecting on the impact of the sale, Jay Chaudhry, now the billionaire founder and CEO of Zscaler, said, "People in the company were ecstatic; they had never imagined so much money. Many were buying new houses, new cars. I know one person who took six months off, rented an RV, and travelled around the country. They finally had the freedom to do what they wanted."
