Flatly, no I would not think it is a red flag to lack side projects. In fact, as a person who had side projects at times, I am more concerned that the company will consider it a case of divided loyalties. Or try to take ownership of something unrelated that I worked on in my spare time. (Because most US employment agreements say that the company owns whatever you develop in your spare time too. See here.)
I think the side project aspect comes more from the fact that new devs have no work experience to show their capability. So having something that you can point to like a personal project can raise your profile in interviews.
The "we own everything you do/think/build/breathe while you work for us" clause is kind of abusive and can probably not be enforced (for most personal projects). In fact, there are laws against it, but they change for state to state.
I don't live in California, and as far as I know my state (and most others) don't offer this protection. Fortunately or unfortunately, depending on how you look at it, my side projects don't make enough money to be enticing. And the companies I've worked for haven't cared about them anyway. But you can't be too careful. Best to get it in writing that the company will not try to take your existing IP when you come to work for them.
You make money with your side projects? :O
The most my company would get are some CSS drawings, some small web apps, and a bunch of fake Internet points.
I used to do some consulting with a partner who had created some business-specific applications. So I helped with that and sometimes was paid to consult or a portion of sales for what I developed. Side work with no big money involved. In fact, I don't like having side work obligations on my free time, so I have endeavored to transfer that work to other interested parties. I mostly get into side projects because people ask for my help.
The few things I developed on my own, like a Chess simulator or my personal finances simulator are not really sale-able as they are. So, those don't make any money at all. I started them to satisfy my own curiosity anyway.
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