When selling the company, Jay Chaudhry didn’t think much about how much he would make, but rather how to make dozens of employees rich as well.
Chaudhry (USA) is 65 years old this year. He is the billionaire founder and CEO of Zscaler – a cybersecurity company currently valued at 28 billion USD.
In 1998, he sold his startup SecureIT to VeriSign, the world’s leading domain name and internet security company, for $70 million, paid entirely in VeriSign stock. The buyer issued nearly 1.7 million additional shares of common stock to acquire SecureIT.
Nearly two years after the deal closed, VeriSign’s stock soared. More than 70 of the 80 SecureIT employees who received stock at the time “became paper millionaires,” Chaudhry said on the site. CNBC.
“People were crazy with joy. They never thought of such a large amount of money. Many people bought new houses, bought new cars. I know someone who took six months off, rented a mobihome (mobile home) and traveled around the United States. They could do whatever they wanted,” he said.
Jay Chaudhry – billionaire founder and CEO of Zscaler. Photo: Zscaler
From 1998 to February 2000, VeriSign stock rose 2,300%, reaching a record high of $253. Part of the reason was the dotcom bubble. However, the bubble burst and the stock lost 75% of its value by the end of 2000. By 2002, the price was just $4.
Chaudhry remembered advice from Jim Bidzos, then-VeriSign president, when he asked what he should do with the shares he received. Bidzos told him to sell them little by little, and periodically. This strategy allowed Chaudhry to still benefit from VeriSign stock before the market crashed.
SecureIT employees who held onto VeriSign stock may have made a profit afterward. The stock was worth $254 in 2021. It’s now hovering around $175.
Chaudhry said he did not know how many shares were sold or when. When he left VeriSign in late 1999, his former colleagues threw him a farewell party. But he did not know then how much of an impact the SecureIT sale would have on employees.
“That night, I went home and opened the statistics table. When I multiplied the number of shares they had by the price of VeriSign, I realized that about 70 or 80 people had become millionaires. This was a very impressive number,” he recalled.
Chaudhry himself felt that he had enough money to be happy. He and his wife had a small house and did not need a luxury car.
Chaudhry and his wife started the company with $500,000 of their own savings and did not raise any outside capital. This made it easier for them to give their employees equity. “They are the ones who make the difference. They work day and night for the company,” he explains.
Chaudhry’s story is similar to that of billionaire investor Mark Cuban (USA). In 1999, after selling Broadcast.com to Yahoo for $5.7 billion, he distributed bonuses to his employees. This helped hundreds of people become millionaires.
Cuban has done this every time he sells a company, starting with MicroSolutions to CompuServe in 1990. Then came the sale of his stake in HDNet in 2019 and his stake in the Dallas Mavericks last year.