One founder sold his startup for $3.7 billion ahead of its IPO, and 400 employees became millionaires overnight

For most startup founders, a billion dollar exit is the ultimate dream. However, for Indian-born entrepreneur Jyoti Bansal, the biggest reward from selling his company is not his own wealth, but the fact that it has changed the lives of hundreds of employees. In 2017, just days before the software company AppDynamics was to go public, technology giant Cisco stepped in and made a $3.7 billion acquisition offer. The deal instantly turned ordinary workers into millionaires and became one of the most closely watched startup acquisitions in Silicon Valley.

$3.7 billion deal makes 400 employees rich overnight

At the time of the acquisition, AppDynamics was preparing for an initial public offering (IPO). The company has become one of the fastest-growing software startups in the business monitoring and analytics space, attracting strong interest from investors.But instead of going public, Bansal chose to sell the company to Cisco. After the deal closed, about 400 employees ended up receiving stock worth at least $1 million, according to a spokesman. Dozens of people reportedly earned more than $5 million.Bansal later described the payouts as “life-changing results” and said the decision was heavily influenced by the financial security it provided its employees.Bansal explained that he weighed several factors before accepting Cisco’s offer. In addition to financial valuation, he considered whether AppDynamics’ products would fit naturally into Cisco’s business and how the sale would impact the company’s nearly 1,200 employees.He also believes that reaching a similar $3.7 billion valuation through the stock market will require three to four years of perfect execution, bringing with it huge uncertainty and risk.By accepting a takeover offer, employees can cash out immediately rather than having to wait years for the company’s market capitalization to reach the same level.

Although the deal was a financial success, Bansal later admitted that he struggled emotionally following the sale. He said he felt a bit disoriented without a startup to operate and believed there was still room for AppDynamics to grow independently.Even so, he maintained that the sale was the right decision based on the information he had at the time.The deal is also personally significant for Bansal, who reportedly owned more than 14% of the company before the acquisition. However, he said his employees remain his top priority during negotiations.

Building new multi-billion dollar startups following AppDynamics

Bansal did not stay away from entrepreneurship for long. After leaving AppDynamics, he co-founded the software companies Harness and Traceable.Harness itself later achieved a $3.7 billion valuation in 2022, indicating that even after the AppDynamics sale, Bansal remained a significant figure in the software startup world.

Other founders who created employee millionaires

AppDynamics’ story is not unique in Silicon Valley, although such cases are still relatively rare. The article also highlights Jay Chaudhry, the founder of Zscaler.Chaudhry recalls that when his early cybersecurity startup, SecureIT, was acquired by VeriSign in 1998, many employees became unexpectedly rich after VeriSign’s stock price soared. Some bought houses and cars, while others took time off to travel and enjoy financial freedom for the first time.Stories like this continue to fuel the entrepreneurial dreams of workers and founders, demonstrating how equity can dramatically change lives when a company succeeds.