The monkeys are coming to San Mateo.
Palo Alto-based SurveyMonkey has signed a lease for a big new headquarters at Bay Meadows, the former horse-racetrack-turned-urban village, as its booming survey business drives a steady rise in workers — or “monkeys,” in company parlance.
The deal for about 210,000 square feet at Bay Meadows’ under-construction “Station 4” is roughly four times the size of SurveyMonkey’s current home at downtown Palo Alto’s 101 Lytton St. and comes barely a year after the company moved in. But a major ramp-up in SurveyMonkey’s enterprise services has accelerated staffing needs in all corporate functions, executives said, spurring a hunt for space that started in early 2014.
“We’re growing faster than we initially expected,” Chief Financial Officer Tim Maly said in an exclusive interview last week, inside a conference room called “Doctor Who” at its Palo Alto offices.
The new home will provide plenty of runway for SurveyMonkey’s future needs — something the company struggled to achieve in ultra-tight downtown Palo Alto, where expansion options are few and prospects for future development are murky. The deal comes as Palo Alto officials study imposing a cap on new office development downtown, which SurveyMonkey has publicly opposed.
“We love downtown Palo Alto, and it’s been a terrific home for us,” Maly said. “It’s a terrific place to start companies. But it’s a challenging place to grow companies in the long term. The reality is that’s unlikely to change any time soon.”
SurveyMonkey’s growth trajectory
This lease is another major milestone in the history of SurveyMonkey, which was founded in 1999 by Ryan Finley, a college junior, as a simple online survey tool. In 2009, when a private equity consortium acquired it, SurveyMonkey had sales of $27 million with just 14 employees, according to Fortune. By 2012, revenue had ballooned to $113 million.
SurveyMonkey hasn’t disclosed figures since then, but executives say the business has exploded since launching a product for businesses in 2013. Today, there are more than 650 workers, including over 400 in Palo Alto.
Nick Ingelbrecht, research director for Gartner’s consumer insights group, said that SurveyMonkey locked in “great visibility and mindshare over the years” with its “freemium” business model, and correctly anticipated that companies would turn to the Internet for consumer research, upending the industry.
“Coupled with this shift to digital has been a growing corporate hunger for more consumer insight, delivered faster and cheaper – a shift that SurveyMonkey anticipated quite well,” Ingelbrecht said in an email.
SurveyMonkey suffered a tragic blow in May, when CEO Dave Goldberg died while on vacation in Mexico. But the company’s acceleration remains on track. Bill Veghte, a veteran of Microsoft and Hewlett-Packard, became CEO earlier this month; Sheryl Sandberg, Dave Goldberg’s wife, joined the company’s board.
“Despite losing Dave, the fundamentals didn’t change,” Maly said.
From horse races to houses — and now monkeys
With the deal in place, SurveyMonkey becomes the first commercial anchor at Bay Meadows, a master-planned redevelopment that broke ground in 2013 after an epic seven-year approval fight. Hundreds of people are now living in the 83-acre project, which will have 1,100 housing units at build out, but the office lease gives the development a major boost, said Chris Meany, a partner with developer Wilson Meany. The firm has partnered with Stockbridge Capital on Bay Meadows since the beginning, nearly a decade ago.
It’s also a validation for the risk the developer took on last year when it made the decision to start building the first office building on spec, or without a tenant in tow.
“You know you’re offering a special product, but it’s still nice to get the affirmation that yup – someone came to the party,” Meany said last week.
In SurveyMonkey’s site-selection process, a couple things were non-negotiable: It had to be on Caltrain, because roughly 50 percent of workers take the rail system — most of them from San Francisco. It had to allow for substantial growth in future years. And it had to be reasonably priced.
Station 4 checked all those boxes. It’s on the Hillsdale Caltrain station stop; is approved for up to 1.5 million square feet of office; and — while terms of the deal weren’t disclosed — was much less expensive than the $8-and-up rents in red-hot markets like downtown Palo Alto.
“Real estate is significant expense,” Maly said. “And we think we can get a space that is just as compelling and terrific for employees at a much lower cost, and we can redeploy that capital for more productive uses — like hiring more people.”
Deciding to go north
Still, he admits the move 13 miles north on Highway 101 is a huge shift for SurveyMonkey, which has been in downtown Palo Alto for about five years and considers the location a major recruiting tool. “Yes, it’s brand new and undeveloped. But at the same time, we’re passionate about the vision,” Maly said. “This is a different development, and we hope it will be a model for development in the Bay Area.”
That vision includes a moderately dense mix of housing types, five planned office buildings, and more than 40,000 square feet of retail built out in a traditional street grid dotted with gathering places and parks.
Meany said that executives “were worried about all the right things. They weren’t just interested in seeing maps of the site. They were taking the trains, making sure the story of transportation was real. It was, ‘Let’s get on the bikes and sit in the parks where our employees will be.’ It’s a testament to their way.”
While the retail options at Bay Meadows are no downtown Palo Alto, more are coming. The new building is located across the road from a “town square” that will include a central plaza, retail shops and apartments. A retail street with additional shops will stretch farther down Delaware Street.
(One thing SurveyMonkey’s new home lacked, though: a roof deck, which has been immensely popular at its current building. So Wilson Meany agreed to add one at Bay Meadows.)
SurveyMonkey expects to move into its new building in early 2017. It won’t need all the space at first, and executives expect they will sublease a portion for a while. As for 101 Lytton St., which is leased to SurveyMonkey long-term? “We’re thinking through options, working through the owners and talking to prospective future occupants,” Maly said.
On a recent tour, the company’s building across the street from the Palo Alto transit center was packed with workers — er, monkeys — with names written on yellow bananas popping out over their desks. SurveyMonkey receives more than three million surveys every day, and says 99 percent of Fortune 500 companies use the service.
Ingelbrecht, the Gartner analyst, said there’s plenty of growth left in the corporate market, but adds a caveat: Many companies are adding new data feeds to their consumer-insights quiver, including social media feeds, rather than relying on straight surveys. “The challenge is keeping up with the shift to Big Data analytics,” he wrote.
This hasn’t escaped notice of SurveyMonkey. Recent announcements — such as a new comparative tool called Benchmarks — suggest SurveyMonkey may already be positioning itself as a more robust analytics platform. And with the move to San Mateo, the company is already thinking years down the line.
“Having the ability to manage our growth for years to come was key,” Maly said. “That means taking a very sizable space and being confident that there will be more space developed in the longer run, when we hopefully outgrow the space we take.”
Bob Garner, Jack Troedson and Josh Rowell of Newmark Cornish and Carey represented Bay Meadows in the transaction. Dave Heibert and Colin Fiechtmeir of DTZ represented the tenant.
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