If top technology initial public offering (IPO) underwriters invest in a real estate business, other real estate investors might want to take note. The business we're talking about is Side, a real estate technology company that helps independent real estate agents and brokers become boutique brands, able to compete with the big guys.
Side has recently raised over $50 million in a funding round, bringing its valuation to $2.5 billion, setting the stage, it says, for a future IPO. And this just three months after earning unicorn status ($1 billion) from its Series D funding round of $150 million. Impressive names are on board: Coatue Management, Tiger Global Management, ICONIQ Capital, DI Capital Partners, Matrix Partners, Sapphire Ventures, Trinity Ventures, and 8VC.
So what's all the fuss about?
In 2019, Side represented over $5 billion in home sales. In 2020, it represented over $15 billion in sales volume, and by 2021, Side predicts it will close over $20 billion in home sales.
The meteoric pace in which Side is growing gets it on track to become a top 10 national brokerage by the end of this year, which would put it in the category of these top producers:
- Realogy Brokerage Group
- HomeServices of America
- eXp Realty
- Douglas Elliman
- Howard Hanna Real Estate/Allen Tate
- Weichert Realtors
- William Raveis Real Estate
How it works
Side partners with top-producing agents to allow those agents to be their own business, promoting their own name and team, rather than working and promoting their current brokerage. And here's what's possible: According to Side, the highest average sales volume per agent at RE/MAX is $4.2 million, at Sotheby's $10 million, and at Side Partner Agent $28 million.
Side will develop an agent's business plan, letting top-producing agents focus on the prospecting, sales, and client services portion of the business while Side handles everything else, such as marketing, brand development, listing properties, conducting transaction functions, and handling legal and insurance matters. As a real estate tech company, Side is positioned to do this by using software to drive efficiency.
Agents and brokers who work for a big-name brokerage report they often don't get the support they need to grow their business. Side's business model makes it imperative to help agents grow as big as they can. And indeed, some agents who switch to Side report that Side helps them grow by promoting the individual agent rather than the brokerage. And that's the reason people might not have heard of Side.
According to Guy Gal, Side's CEO: "It's an agent service, not a brokerage service." In other words, Side helps agents grow their business by flip-flopping the model: Side is the vendor that provides the service to the agent and the business that agent owns. Side purposely doesn't market itself on real estate signs, for example, and therefore earns the distinction as being a white-label brokerage -- agents rebrand the service using their name, not Side's name.
The Millionacres bottom line
Side takes a cut on each transaction, so it's incentivized to help agents be the best they can be, unlike traditional brokerages that cease to get as high a cut once an agent does a certain amount of business. Side's approach is appealing to top-producing agents who already have a book of business, are ready to promote themselves, and want to stop being responsible for all the backend work.
Over 1,800 agents have partnered with Side in California, Florida, and Texas, and Side plans to expand to 15 more states by the end of the year. As the real estate industry is in flux, investors might want to look at companies like Side that take an innovative approach.