When Jay Chaudhry sold his first company for $70 million, he was less focused on his own wealth and more on how the deal could transform the lives of his employees. Chaudhry, now 65 and recognized as the billionaire founder and CEO of Zscaler Inc., a cloud cybersecurity firm valued at approximately $28 billion as of this week, has always prioritized the well-being of his team.
In 1998, as a first-time entrepreneur, Chaudhry and his wife, Jyoti, sold their startup, SecureIT, to VeriSign in an all-stock deal. The transaction yielded a significant financial gain, but for Chaudhry, the most rewarding aspect was seeing more than 70 of SecureIT’s 80 employees become millionaires “on paper” within two years of the deal, as VeriSign’s stock price skyrocketed.
“People were ecstatic,” Chaudhry told CNBC Make It. “They never imagined having so much money. Many bought new houses and cars. One employee even took six months off to travel around the country in a rented mobile home. They had the freedom to pursue their dreams.”
VeriSign’s stock surged by over 2,300% between the acquisition and February 2000, reaching a peak of $253 per share. While the dot-com bubble eventually burst, causing VeriSign’s stock to drop by about 75% by the end of 2000 and sink to nearly $4 in 2002, Chaudhry had already secured substantial returns. Following the advice of VeriSign’s then-chairman, Jim Bidzos, he sold portions of his stock gradually, allowing him to benefit from the stock’s high before the market downturn.
Chaudhry doesn’t know whether or when his former employees sold their shares, but those who held on saw the stock rebound, closing at $254 per share in January 2021 and currently sitting around $175 per share. Reflecting on the impact of the SecureIT sale, Chaudhry recalls the moment he realized just how life-changing it was for his team.
“I went home and looked at a spreadsheet of all the stock options my employees had,” Chaudhry said. “When I multiplied it by VeriSign’s stock price, I realized we had created around 70 or 80 millionaires. It was truly impressive.”
Chaudhry credits his ability to be generous with stock options to the fact that he and his wife funded SecureIT with their own life savings of roughly $500,000, avoiding outside investors. This bootstrapping approach allowed them to retain more equity to share with their employees, who Chaudhry acknowledges were the key to the company’s success.
This story echoes the actions of fellow billionaire Mark Cuban, who similarly turned hundreds of his employees into millionaires after selling his company, Broadcast.com, to Yahoo for $5.7 billion in 1999. Cuban has continued to reward his employees with bonuses in every company sale, including his sales of HDNet and the NBA’s Dallas Mavericks.
Chaudhry’s journey highlights the profound impact that a leader’s generosity and appreciation for their team can have, not just on the success of a business, but on the lives of those who helped build it.
Source: CNBC
