How Jyoti Bansal, an Indian-American CEO, transformed 400 employees into millionaires

Jyoti Bansal, the founder of AppDynamics, shared a common vision among entrepreneurs: to create a successful startup. However, he faced a challenging decision when he chose to sell the company for $3.7 billion.

What initially appeared to be a significant milestone eventually turned into one of his greatest regrets. During an interview with CNBC Make It, Bansal explained that he made the decision to sell his software company with his employees’ welfare in mind.

 By selling AppDynamics in 2017 for $3.7 billion, Bansal made 400 of his employees millionaires. The India-born entrepreneur, now living in San Francisco, referred to the sale as “the hardest decision” of his career, yet he did it for the benefit of his team.

In 2017, as AppDynamics prepared to go public, IT behemoth Cisco jumped in with an offer to buy the business for an astounding $3.7 billion.

Who is Jyoti Bansal?

Bansal has always had the ambition to become an entrepreneur. An alumnus of IIT Delhi, he is recognized as the primary inventor on more than 20 US patents.

After spending eight years as a software engineer in Silicon Valley, he eventually obtained his Green Card and embarked on his journey to start his own company.

He started AppDynamics to address the most pressing problems he encountered as an engineer, creating tools to diagnose outages and fix bugs in software programs.

What is AppDynamics?

Unlike many software startups, AppDynamics was established with a focus on the enterprise market—specifically targeting large companies that can spend hundreds of thousands, if not millions, of dollars each year. The company gained a strong reputation for assisting major organizations in fixing their malfunctioning applications.

As stated on their official website, “Powered by Cisco, AppDynamics is dedicated to helping companies view their technology through a business lens, allowing them to collaborate effectively and prioritize what truly matters. We are transforming the observability space and streamlining the digital transformation challenges faced by the world’s largest enterprises.”

Additionally, the website claims, “We enable businesses to thrive by transforming performance into profit.”

Why did he sell AppDynamics?

In his mid-forties, Bansal dedicated many years to enhancing his software engineering skills before realizing his entrepreneurial ambitions.

Several factors influenced his decision to sell AppDynamics, including how well the company’s software products fit within Cisco’s portfolio and the potential financial and cultural impacts on its nearly 1,200 employees.

While discussing his thought process about the acquisition with CNBC Make It, he remarked, “We had the chance to join a larger platform like Cisco, which includes their broad customer base and market presence. That was one consideration.”

“Another important factor was culture—what kind of environment your employees would be stepping into. Cisco, to their credit, did an excellent job of granting the AppDynamics unit a substantial level of independence,” he added.

He mentioned that the third factor was financial motivations. “As the sole founder, I was lucky enough that any financial outcome would have worked for me. However, we had approximately 300 employees who earned more than a million dollars from the final offer we accepted. Additionally, many employees achieved outcomes of over $5 million,” he stated.

Why does Bansal’regret’ the decision?

Bansal characterized the aftermath of the sale as filled with sleepless nights. He noted that while some might think selling the company was an easy choice, it was, in reality, the toughest decision he ever made. After the celebration party, he realized he didn’t even want to go home, which he described as a bittersweet moment.

“I invested nine years of my life completely into what we were building. Suddenly, it felt like the conclusion of a chapter,” he shared with the media.

“[After the sale], I came to understand how much I truly enjoyed the journey of building the company, developing products, solving problems, and competing in the market—all the aspects of entrepreneurship I had experienced. It was intense and stressful, but I found it incredibly rewarding. I also felt that we hadn’t fully achieved everything we could have.”

Despite the emotional difficulties, Bansal recognized that selling AppDynamics to Cisco was the right decision based on the information available at that time. The deal also proved financially advantageous for him, as he owned over 14 percent of the company.

He also compared his post-IPO projections with Cisco’s valuation of the startup to identify which option was more financially sound. He mentioned that reaching a market capitalization of $3.7 billion would have taken “three to four years of outstanding execution.”

“That translates to three to four years of risk that we… mitigated for all the employees there. [That’s] a significant impact.”

In 1998, when SecureIT, a cloud cybersecurity firm, was acquired by VeriSign for $70 million, founder and CEO Jay Chaudhry didn’t fully comprehend the sale’s effects on his employees until he left a company-wide celebration commemorating the milestone.

Chaudhry revealed to CNBC Make It in July that at least 70 out of the company’s 80 employees became millionaires on paper when VeriSign’s stock price surged two years later.