When entrepreneurs weigh the pros and cons of selling their startups, the decision often comes down to a delicate balance of personal gain and employee welfare. For Jyoti Bansal, the founder and chairman of AppDynamics, the choice to sell his software company to Cisco for a staggering $3.7 billion in 2017 was a no-brainer – not because of the lucrative payday, but because it guaranteed life-changing wealth for hundreds of his employees.
At the time, AppDynamics was on the cusp of going public, but Bansal knew that taking the company public would come with significant risks and uncertainties. By selling to Cisco, he could ensure that roughly 400 employees would see their shares skyrocket in value to at least $1 million, with dozens more reaping rewards of $5 million or more. This wasn’t just a financial windfall; it was a chance to transform the lives of the people who had worked tirelessly to build AppDynamics from the ground up.
Bansal’s decision was driven by a deep sense of responsibility to his employees, as well as a pragmatic assessment of the company’s prospects. He compared the sale price to his own post-IPO projections, concluding that it would take several years of flawless execution to reach the same valuation. By selling, he could eliminate that risk and provide a sense of security for his team.
In hindsight, Bansal admits to having mixed feelings about the sale. He felt lost without a startup to run, and wondered if he could have grown AppDynamics further. However, he stands by his decision, knowing that it was the right call based on the information he had at the time. The sale also brought him a significant personal fortune, thanks to his 14% stake in the company.
Bansal’s commitment to his employees is a refreshing exception in the startup world, where founders often prioritize their own interests above all else. Jay Chaudhry, the founder of Zscaler, learned this lesson the hard way when his company was acquired by VeriSign for $70 million in 1998. Only later did he realize the full extent of the windfall for his employees, with at least 70 of them becoming millionaires on paper.
As entrepreneurs weigh the pros and cons of selling their startups, they would do well to remember the human impact of their decisions. By putting their employees first, they can create a legacy that goes far beyond mere financial success.
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