Jyoti Bansal made a life-changing decision when he sold his software startup AppDynamics to Cisco for $3.7 billion in 2017. The sale was just days away from AppDynamics going public, but Bansal chose the acquisition offer with his employees in mind. The decision resulted in around 400 AppDynamics employees seeing their shares in the company rise to at least $1 million in value.
“We had dozens of employees with $5 million-plus outcomes. These are life-changing outcomes,” Bansal said. Several factors influenced Bansal’s choice to sell, including how AppDynamics’ software products would fit within Cisco and the impact on the startup’s nearly 1,200 employees, both financially and culturally.
He also weighed his own post-IPO projections against Cisco’s valuation to determine the smarter monetary option. Bansal estimated that reaching a $3.7 billion market capitalization would have taken “three to four years of great execution.” He added, “That means three to four years of risk that we reduced for all of the employees there. That’s a significant impact.”
As the founder, Bansal owned more than 14% of the company, so the deal was financially momentous for him personally as well.
However, he emphasized that the biggest factor in his decision was the impact on his employees.
Bansal’s employee-focused acquisition choice
After the sale, Bansal admitted he felt he could have continued growing AppDynamics and initially felt directionless without a startup to run.
He has since co-founded two other software startups, Traceable and Harness. Nevertheless, he maintains that selling was the right choice based on the information available at the time. Startup founders don’t always prioritize their employees’ interests when considering selling their companies, making Bansal’s decision notable.
In a similar move, when cloud cybersecurity firm SecureIT was acquired by VeriSign for $70 million in 1998, founder and CEO Jay Chaudhry ensured a substantial windfall for his employees. Many became millionaires on paper when VeriSign’s stock later soared. Chaudhry recalled, “People were going crazy in the company because they had never thought of so much money.
A lot of them were buying new houses. They were buying new cars. I know one guy took six months off, rented a mobile home, and traveled around the country.
They could do what they wanted to do.”
