With a $2.5B valuation, Side prepares to take on NYC. Will agents buy in?

Speeding toward an IPO, the unicorn of the residential brokerage world preps for its toughest challenges yet

Guy Gal (Getty Images)
Guy Gal (Getty Images)

Side has had an explosive year. 

In March, the white-label brokerage’s $150 million Series D propelled its valuation above $1 billion. A few months later, that valuation more than doubled to $2.5 billion after Tiger Global Management, the world’s most active venture investor in the second quarter, led a $50 million round. 

To both its champions and its rivals, Side’s ascent represents tech investors’ zeal for residential real estate. But as the brokerage prepares to go public and enter New York City’s dog-eat-dog market, questions swirl around how its behind-the-scenes model will scale — and whether agents will buy into the pitch. 

Side’s model pits its agents and back-end suite of tools and support teams against legacy firms entrenched in their markets and supported by long-cultivated relationships with local business and political establishments.

The fundamental stumbling block Side must overcome is one of name recognition. 

Side’s critics — and even its supporters in the brokerage world — say that the company fills a niche, but it could never displace the big household names that have dominated for decades. The cardinal rule, they argue, is that consumers trust big brands more than individual agents. 

Side’s co-founder and chief executive, Guy Gal, calls this “a big brokerage lie.” 

“Consumers prefer boutique experiences to big brand experiences in all things in life, that’s just a fact,” he said via email after declining an interview for this story — an uncharacteristic move for the typically vocal entrepreneur.

“The brand only matters to part-time and inexperienced agents who use the big brand as a way to make consumers believe that they are actually experienced,” he continued. “That is how the brokerage system is set up.”

With $250 million in funding, Gal and his co-founders, Edward Wu and Hilary Saunders, are throwing down the gauntlet. How much success their four-year-old company finds could change the game for an industry in the throes of consolidation.

Building blocks

Although the brokerage’s fortunes have skyrocketed in the past six months, investors first planted the seeds six years ago.

  Zach Aarons, co-founder and managing partner at real estate-focused venture firm MetaProp, recalled meeting Gal and his co-founders in 2015. The trio came to MetaProp’s office with nothing but some mockups and a demo version of a transaction management platform.  

Aarons said that MetaProp committed to back the unnamed, unestablished company right then. 

“The idea that you could put a brokerage in somebody’s pocket… is something that I always wanted to do,” he said. He attributed his confidence in the San Francisco-based trio to a certain je ne sais quoi.

“You meet somebody, you get the feeling that they’re going to walk through walls,” he said.

Camber Creek’s Jeffrey Berman, another early-stage investor, felt something similar. Meeting Gal, Wu and Saunders at a WeWork in 2016, he gathered they had a clear vision and “humility mixed with enough arrogance to be able to say ‘I can do something that no one else has before.’” 

What was that something? According to Berman, Side’s anti-big-brands ethos taps into the world of creators and influencers like no real estate brokerage has before. At the heart of the company, he said, is its technology tools for agents, such as marketing automation and contract-writing software.

Gal previously founded three different companies focused on monetizing video content. After selling the final venture, Kingmaker, to rival Joyous in an all-stock deal in 2013, Gal told tech news site Pando he wished he’d spent more time building out the business before raising money. With Side, Gal took his time.

He moved to San Francisco to join Joyous and spent two years leading its business development. From 2015 to 2016, he spent a year as an “entrepreneur-in-residence” at Matrix Partners, an early-stage and seed venture investment firm. (Matrix has since participated in Side’s Series D round after managing partner Dana Stalder personally invested in the firm’s Series C.)

A childhood friend-turned-realtor inspired Gal to jump into the world of residential brokerage. The friend, Phil, worked as an agent in Toronto, one of Canada’s hottest real estate markets, and tried to launch his own brokerage before getting fed up with the bureaucracy of running a business, according to an interview Gal gave to Disclosures.io’s blog. 

Gal first crossed paths with Wu — now Side’s chief technology officer — after advising Vidyard, a video platform startup Wu co-founded in 2009. While doing market research on how “we could fix the broken brokerage system,” as Gal put it, the pair encountered Saunders, a former real estate litigator and Coldwell Banker broker in San Francisco who founded Reside Network, seemingly a precursor to Side, in 2014 to help agents and brokers build their personal brands. 

“This is not an overnight success,” said Berman. “Side has a playbook.” 

The playbook

Side has made headlines over the years for its provocative recruiting slogan: “Not all agents, just the best agents.” The fact that the brokerage only recruits one top agent per geographic area means interested agents need to hurry or risk their niche being filled. 

While investors steadfastly see Side’s technology as the heart of the company, tech is only one aspect of its offering. 

Side provides each “partner” — an agent who starts a brand at the brokerage — with a business manager who checks in weekly and creates business plans for the team. A 50-person in-house staff recruits new agents for partners’ brands and acts as the go-to for any vendor or service a team needs. Side also provides its own custom tools, such as transaction management software, and its company identity is always behind-the-scenes.

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There is, of course, a catch. If partners elect to leave within their first two years, Side keeps their brands. Side partners also have to bear the cost of many services and business expenses, such as marketing and office leases, but Side’s nearly 400 employees, dubbed “inSiders,” handle logistics and develop the technology to make it happen. 

High-profile agents who’ve jumped to Side include Los Angeles-based Kofi Nartey and former Los Angeles Dodgers outfielder Matt Luke. Anthony Marguleas, who previously ran an independent firm, Amalfi Estates, in Los Angeles, joined Side in 2019.

“I would pay Side double what they’re charging me,” said Marguleas, who noted that he hasn’t lost an agent to another firm since making the jump. “I don’t want to handle managing my website and managing our marketing and managing the commission checks.”

Multiple sources and reports say that Side’s commission split is 90-10 with a $50,000 annual cap, and partners must often pay an annual sum of $25,000 per agent. Gal disputed those numbers, which he said vary. 

Ben Bacal, who founded his brand Revel Real Estate with Side in 2019, said the brokerage has saved him from hiring back-office staff — an annual expense he estimates to be about $700,000. 

“They just streamlined my business,” he said.

But it’s not all happy endings. Side’s wooing process has generated tension in California, where the brokerage has operated the longest. Its calling card to agents comes in the form of branded giveaways: boxed bottles of sparkling wine from Napa Valley and RocketBooks, reusable notebooks designed to digitize handwritten notes. Retailing for roughly $35 a pop, the gifts are accompanied by a note. One viewed by The Real Deal summarizes the pitch: “Go from agent to founder.”

In California, these packages are often sent to agents’ offices, which means that some managers at rival firms have accumulated samples of Side’s gifts and their accompanying pitches, eliciting a mix of laughs and scoffs. 

“That’s a little bit over the line,” said one executive who spoke on the condition of anonymity. “They’re really aggressive in some ways.”

Gal, who self-identifies as a compulsive gifter, vigorously defended the practice.

“Side gets postcards at our office all the time from other brokerages that are being sent to agents in an attempt to recruit,” he said via email. “Instead of sending a postcard, we send something of value and use, which is consistent with our mission.” 

He also noted that Side doesn’t offer signing bonuses, a veiled reference to Compass and other brokerages that have begun kicking in all-cash offerings as part and parcel of recruiting. However, Side’s first seven agent partners received equity, and stock options are listed as perks included on a slew of Side’s job postings. 

“It’s just the new kid on the block trying to sell the same story over and over,” said Jeff Hyland, president of Hilton & Hyland. He expressed skepticism of Side’s no-brand model, adding that “you can’t do that when you get into luxury markets.”

It’s no secret that Gal holds little regard for many of Side’s competitors. During a July interview, he lambasted brokerages including Compass, Realogy firms, eXp Holdings and REMAX. 

“There are not a lot of top producing agents at those companies anymore,” he told the podcast “Real Trends.” When the interviewer gently called him out, he sighed. 

“It’s just what’s true,” he said. “I’m not looking to pick fights, I’m just very sober about what is and what isn’t.” 

In an email to The Real Deal, Gal responded to a question about the founders’ real estate bona fides by saying, “we have a very high bar for who we hire, and unfortunately most of the corporate leadership and management inside real estate brokerages do not meet that bar.”

Biting into the Big Apple 

Love it or hate it, Side’s war chest and appetite for growth are attracting attention. 

Over the summer, there have been rumblings within the New York City brokerage community that Side has begun hunting for someone to serve as its broker of record in the state and interview agents. In August, Saunders put a call out on LinkedIn that Side was looking to hire managing brokers in Oregon, Washington, New York, Colorado and the Washington, D.C., area. Gal said the firm planned to launch its New York operations early next year.  

Side’s eastward expansion comes as another California staple, The Agency, is setting up shop in New York, with its first office slated to open this month in Long Island City. The migration shows the scope of opportunity the New York market represents to firms, but it won’t be a cakewalk. 

Ryan Serhant, who started his own brokerage last year and arguably could have been a top recruit for Side if the clocks were wound back, said he loves the firm’s concept but expressed doubts about how the model would fare in a luxury market like New York.

“Consumers want large brands to represent them, it’s just the way it works,” he said. “Look what they’re wearing. Look where they buy. Look what they spend just to be on Fifth Avenue just because they can say they live on Fifth Avenue. It’s just a different type of clientele.” 

Richard Grossman of Brown Harris Stevens agreed, questioning how many top agents would be lured by the support services at Side and the dream of owning their own brand. 

“My experience is that companies support their biggest brokers and largest teams in a very, very significant way,” he said. “It’s an interesting idea, but I really question whether that is going to be scalable.”

Time will tell how many agents will truly jump at the chance to start their own brand, but once an agent takes the plunge, hopping to another firm would be challenging, according to Bacal.

“If you leave, it’s major failure,” said Bacal. “You’re telling the world you can’t create your own business, so you’d never leave.”