Tales of overnight millionaires are not uncommon in the world of tech startups, where companies are often acquired. But Jay Chaudhry and his first company, SecureIT, stand out as he wasn't the only one to walk away a millionaire.
Don't Miss:
- Here’s the AI-powered startup that turns traders into influencers achieving 12% monthly growth – invest in it at only 10 cents per share.
- Don’t miss out on the next Nvidia – you can invest in the future of AI for only $10.
- America's construction sites are desperate for Robots — here’s how to invest in a house-printing startup who’s making them and be a part of a $16 trillion industry.
Chaudhry, now 65 and the billionaire CEO of cloud cybersecurity giant Zscaler, recalled the moment in 1998 when he sold SecureIT to VeriSign for $70 million in an all-stock deal. It wasn’t his personal windfall that excited him most, though.
“People were going crazy in the company, because they had never thought of so much money,” Chaudhry told CNBC’s Make It series. “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.”
The key was Chaudhry’s decision to bootstrap SecureIT, using $500,000 of his and his wife Jyoti’s life savings rather than seeking venture capital. This approach allowed him to distribute more equity to his employees, a decision that would prove life-changing for many.
As VeriSign’s stock price soared in the following years, climbing more than 2,300% by February 2000, the impact of Chaudhry’s equity distribution became clear. Of SecureIT’s 80 employees, more than 70 became paper millionaires.
The tech bubble burst later that year, and VeriSign’s stock lost 75% of its value, but many employees who held onto their shares likely saw great returns in the long run. As recently as January 2021, VeriSign’s stock closed at $254 per share.
Trending: Unlock the hidden potential of commercial real estate — This platform allows individuals to invest in commercial real estate offering a 12% target yield with a bonus 1% return boost today!
CNBC noted that Chaudhry’s story echoes that of Mark Cuban, who famously turned hundreds of Broadcast.com employees into millionaires after selling the company to Yahoo for $5.7 billion in 1999. Cuban has continued the practice with subsequent company sales.
For Chaudhry, the realization of his impact came gradually. “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,” he said. “It was impressive.”
See Also: If there was a new fund backed by Jeff Bezos offering a 7-9% target yield with monthly dividends would you invest in it?
Chaudhry’s story points to the potential benefits of bootstrapping for both founders and employees. By not chasing venture capital, Chaudhry maintained greater control over his company’s equity and could reward the employees who, in his words, “make the difference.”
As the tech industry continues to grapple with issues of wealth inequality and employee compensation, stories like Chaudhry’s remind us of the impact thoughtful equity distribution can have on employees’ lives.
While not every startup will achieve a $70 million exit or create dozens of millionaires, Chaudhry’s approach offers food for thought for entrepreneurs and investors alike.
Read Next:
- This billion-dollar fund has invested in the next big real estate boom, here's how you can join for $10.
- Finally allowing commercial real estate investing to be more accessible — This fund aims to triple your money in 10 years is with a surprisingly low minimum.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Comments
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
