Jay Chaudhry’s gains were not as important as those of his dozens of employees after he sold his first company for $70 million, turning many of those employees into millionaires.
Today, Chaudhry is better known as the billionaire CEO and founder of Zscaler, a cloud-operated cybersecurity company that, on Wednesday, July 24, was valued at approximately $28 billion. He started as an entrepreneur in 1998 and sold his co-launched startup SecureIT to VeriSign for a sizable windfall in an all-stock deal.
According to Chaudhry, VeriSign’s stock price soared nearly two years after the deal, making over 70 out of 80 of SecureIT’s employees veritable millionaires.
The CEO noted, “People were going crazy in the company because they had never thought of so much money. A lot of them were buying new houses. They were buying new cars. I know one guy, he took six months off, rented a [mobile home] and went around the country. They could do what they wanted to do.”
Between that acquisition and February of 2000, VeriSign’s stock rose by over 2,300% and closed at a high of $253 per share due in part to a temporary bubble for tech stocks and two stock splits. Later that year, the bubble burst, causing VeriSign’s stock to lose 75% of that peak at the end of 2000, dropping to only about $4 in 2002.
Jim Bidzos, the chairman of VeriSign at the time, suggested that Chaudhry sell parts of his shares of the company’s stock in small increments at regular intervals. This strategy greatly benefitted Chaudhry and helped him take advantage of VeriSign’s stock growth before the market crash.
SecureIT employees who stood fast with their VeriSign stock likely saw their patience pay off in dividends, as the stock closed at $254 per share as recently as January of 2021. Currently, that price is now valued at about $175 per share.
Chaudhry has since stated he’s still determining if or when his former employees cashed in their shares. In 1999, when he left VeriSign, his former employees threw him a party, eventually pressing upon him later that year what it meant for Chaudhry to sell SecureIT.
He explained, “I went home that night and looked at the spreadsheet of all the [stock] options they had, and I multiplied by the stock price of VeriSign. That’s when I realized that the math was about 70 or 80 millionaires with stock options. It was impressive.”
As crucial as that money was to his employees, however, Chaudhry and his wife, Joyti, already had the funds to be happy, as he stated they already had a “nice, typical middle-class house at that time, and we didn’t have any fancy cars or fancy payments.”
Chaudhry attributes the sale’s success to his approach to funding the company through bootstrapping, as he and his wife eschewed outside investors and instead funded SecureIT themselves through their $500,000 of life savings.
This approach to funding enabled additional equity to be distributed among the company, which Chaudhry said was “good, because those employees make the difference — they [were] working day and night.”
Another billionaire, Mark Cuban, recently shared a similar story when he provided employee bonuses after selling Broadcast.com for $5.7 billion to Yahoo in 1999. Cuban pointed out this decision made instant millionaires of hundreds of his employees.
Cuban has consistently been generous over the years, starting with CompuServe’s acquisition of the software brand MicroSolutions in 1990. In 2019, he sold his majority stakes in HDNet, today known as AXS TV, and in 2023, the NBA’s Dallas Mavericks, as Cuban added, “And only HDNet had any layoffs right after the sale.”
