Jyoti Bansal, founder of AppDynamics, faced a monumental decision in 2017: take his company public or accept a $3.7 billion acquisition offer from Cisco. While a lucrative IPO was a possibility, Bansal prioritized his employees, ultimately choosing the sale, a move that transformed the lives of hundreds of his staff. This decision, while initially followed by regret, highlights a compelling case study in entrepreneurship, showcasing the intricate balance between personal ambition and the welfare of a team. His subsequent entrepreneurial ventures, including Harness, valued at $3.7 billion in 2022, demonstrate his continued success, but also offer a retrospective on his philosophy of leadership and the complex considerations involved in significant business decisions.
Key Takeaways:
- Jyoti Bansal prioritized employee well-being over personal financial gains when selling AppDynamics for $3.7 billion to Cisco.
- Approximately 400 AppDynamics employees saw their stock options increase to at least $1 million, with dozens exceeding $5 million.
- Bansal initially regretted the sale but ultimately defended it as the better choice considering the **financial security provided to his employees** and the risks involved in an IPO.
- The story provides a unique perspective on the challenges founders face when weighing personal ambition against the well-being of their employees, highlighting the importance of ethical business practices.
- The case of Jay Chaudhry, whose sale of Zscaler resulted in many employees becoming millionaires, underscores the far-reaching implications of such acquisitions for employees.
A $3.7 Billion Decision: Prioritizing Employees
The sale of AppDynamics to Cisco in 2017 wasn’t just a significant financial transaction; it was a defining moment reflecting Bansal’s leadership philosophy. While the potential for personal wealth through an IPO was undeniable, Bansal believed that the certainty offered by Cisco’s acquisition provided a more secure financial future for his employees. He weighed the potential for a lengthy and risky IPO process against the immediate, substantial gains his employees would receive from the sale. He estimated that reaching a similar valuation through an IPO would have required “three to four years of great execution,” a timeline fraught with potential risks. This risk mitigation, according to Bansal, was a crucial factor in his decision.
Life-Changing Outcomes for Employees
The impact on AppDynamics employees was profound. A company spokesperson confirmed that around 400 employees saw their shares increase to at least $1 million, with a significant number receiving payouts exceeding $5 million. Bansal himself described these as “life-changing outcomes,” highlighting the transformative effect of the acquisition on their lives. This outcome significantly influenced the decision as he prioritized this aspect above his own significant financial gain. His own gains were substantial given his **14%+ ownership**, yet the impact on his employees outweighed that personal financial gain.
Regret and Retrospection: A Founder’s Journey
Despite the substantial benefits for his employees, Bansal subsequently admitted to regretting his decision. Speaking to CNBC Make It, he expressed a belief that AppDynamics could have continued to grow independently and achieve even greater heights as a public company. The lack of a startup to actively lead contributed to a period of what he described as aimlessness. “I believed that he could’ve kept growing AppDynamics, and felt aimless without a startup to run,” he stated. However, he maintains that given the information and circumstances at the time, choosing the sale was the financially sound and ethically responsible action.
Learning from the Past, Embracing the Future:
The experience of selling AppDynamics hasn’t diminished Bansal’s entrepreneurial drive. He now leads two other successful software companies, Traceable and Harness. Notably, Harness achieved a valuation of $3.7 billion in 2022, mirroring the value he secured for AppDynamics. This mirrors his sustained success. This parallel is not lost on Bansal, as it underscores his continued capability in business acumen. Bansal’s ongoing success showcases resilience and adaptation in the tech world, emphasizing that even with a decision accompanied by initial regret, the experience has shaped his leadership and entrepreneurial approach.
A Broader Perspective: Employee Well-being in Acquisitions
Bansal’s experience isn’t isolated. Cases like Jay Chaudhry’s sale of Zscaler to VeriSign in 1998, which resulted in at least 70 of its 80 employees becoming millionaires, show a similar pattern. While Chaudhry initially underestimated the impact of the sale on his employees, the outcome profoundly affected their lives. Chaudhry shared anecdotes of employees buying houses, cars, and even taking extended vacations, experiences enabled by the windfall. **”People were going crazy in the company, because they had never thought of so much money,”** Chaudhry recalled. These examples underscore the significant role that an acquisition can play in the lives of employees, highlighting the responsibility founders have to consider this aspect of any business decisions.
A Lesson in Ethical Entrepreneurship:
The stories of Bansal and Chaudhry present compelling case studies in ethical entrepreneurship. While maximizing personal financial gain is a natural ambition for founders, these examples illuminate the importance of considering the broader impact on employees. The decisions to prioritize employee well-being, even if accompanied by personal regret, demonstrate a commitment to responsible leadership and contribute to a positive narrative within the business world. They serve as valuable examples, both for current entrepreneurs and future generations, of how ethical considerations influence significant choices. Their decisions underline the complex interplay between personal ambition, employee well-being, and the long-term sustainability of a business’s success.
