Square Raises $150M at a $6B Valuation

[dchuk]

> "Square, a six-year-old start-up, spent much of its early years bringing small, square-shaped credit card readers to small and medium-sized businesses."

6 years old, just raised $150mn...yeah, that's not a startup anymore. It seems some people consider tech companies and startups to be equivalent, but startup is a term for business stage not business type.

[TeMPOraL]

Remember, you're quoting from a newspaper. Word "startup" in tech crowd (and thus, in media) means "sexy", "hip", "new", "innovative", and is a label you wear to associate with the sexy crowd (as opposed to the old, fossilized world of typical companies and corporations). Some of the features of this community are:

- the thing to brag about at meetups is not profit, but investor money taken and burned

- you need to grow very fast, because it's how you get investor money

- you ain't going to have a profitable business anyway, so you need to have a plan to sell your soul (and users), aka. "an exit"

- working overtime for free is justified, because "startup!"

etc.

But the primary reason for calling yourself "a startup" seems to be the association with "sexy and innovative crowd". You lose the label when you've been around so long that you make a profit and have other startups competing against you.

Evidence: I don't see companies bragging about being "Small Businesses", which would be a legal term.

[rcaught]

I've come to understand a startup as a company that doesn't want to pay overtime.

[isoos]

It would be better to demolish the hip/sexy part of the 'startup' phrase in mainstream media. Recently I've started to put more emphasis on the definition that Dave McClure gave on quora about a year ago:

    A 'startup' is a company that is confused about:
    - What its product is.
    - Who its customers are.
    - How to make money.
    As soon as it figures out all 3 things, it ceases being a startup and becomes a real business.

http://www.quora.com/What-is-the-proper-definition-of-a-star...

I think this is really a clever way to define a startup, it is true to the experience, and takes away the hype.

[ChuckMcM]

Any company that has yet to be 'self sustaining' (which is to say a Going Concern in accounting terms) is a start up as far as I am concerned. Until it reaches the point where it generates enough money to keep operating without additional outside investment, it is in danger of going out of business when that outside investment ceases to be available.

[hayksaakian]

I've noticed Paul graham and others redefine startup to refer to companies with large growth rates.

In this case, if the company is still growing quickly 6 years in, maybe its still a startup?

[bane]

I've come to understand "startup" to mean that the company is the product.

[akamaka]

Seeing as the average life expectancy of a Fortune 500 company is 40-50 years[1], it's not unreasonable to consider a 6-year-old company to still be in the "starting up" phase of its existance.

[1] http://www.businessweek.com/chapter/degeus.htm

[jackgavigan]

"A startup is an organization formed to search for a repeatable and scalable business model." - Steve Blank

http://steveblank.com/2010/01/25/whats-a-startup-first-princ...

[orky56]

Peter Thiel defines a startup as such in Zero to One - A startup is the largest group of people you can convince of a plan to build a different future.

So is that different future one where there will be further penetration & distribution of existing Square products or will we continue to see Square more horizontally integrate services for businesses? I personally think they have lacked a clear vision over the past few years but have reshaped it and resold that to investors for a valuation 2x from 2yrs ago.

[paulrademacher]

P(startup) = c * P(pivot), for some constant c

[hbbio]

The definition of a startup (from PG?) sums up to a company that favours growth over profitability. For instance, a company like Square that keeps raising money to accelerate instead of taking profits.

[pinaceae]

well, you could argue that the startup business plan is to become profitable through outside investment rather its own business model. square fits this, their target group is still a single customer with a large sum of money rather than lots of customers with small amounts (aka a business).

losing money as an intermediary on financial transactions is not easy. banks and organised crime sure scratch their head looking at square.

[vladd]

It's actually a term for businesses that are designed to grow fast and still experience a high growth rate:

http://www.paulgraham.com/growth.html

[Vulkum]

I have had this brilliant idea of a start-up. A website that has one big button saying start-up, and it costs $1 to press, and voila you have your own start-up. So...who's in?

[dsl]

If you have enough employees to need a full time HR person, you're not a startup anymore.

[kartikkumar]

I don't really understand the payment-company wars. Living in Europe, I can instantly wire money to anyone in the EU for free, so I'm wondering if companies like Square are solving a problem that uniquely exists in the US, or whether I've got the wrong end of the stick.

Does this have to do with the predominance of credit cards in the US otherwise (a relatively uncommon mode of payment where I live)?

Seems to me like a high value for a problem that I can't relate to.

[masklinn]

> Does this have to do with the predominance of credit cards in the US otherwise (a relatively uncommon mode of payment where I live)?

Likely, and the same problem exists in European countries with significant CC[0] penetration (e.g. France, or Iceland where cash marks you as a tourist and I've seen people buy a single packet of gum on card): you have to request a quote from a payment processor, the first link I get (EMS) tells me to "request an offer or contact the sales team".

[0] leaving it for posterity, but I actually meant "cards-based payment" rather than "credit card": the payment processor issue applies to both. It is true (in my experience) that euro countries tend to use debit cards rather than credit cards.

[Kiro]

> a relatively uncommon mode of payment where I live

This differs a lot within Europe. In Scandinavia cash is really uncommon.

EDIT: Ok, so you're talking about debit versus credit card? That's a different story but then I don't understand how you see Square as US centric. It applies to debit cards as well as credit cards. The reason it won't work in Europe is because most countries here require chip (see iZettle for a competitor with support for chip).

[rbinv]

SEPA wire transfers are actually not processed instantly. Banks are allowed to take up to one working day. Also, there are still numerous banks that charge a fee per transaction.

[encoderer]

Apple Pay is certainly a threat to Square, but I'm sure Apple doesn't care about POS terminals and that's a pretty huge market on its own.

On top of that, Square Cash is right now the absolute easiest way to send somebody money. Just a moment ago I sent a friend $45 in less than 60 seconds with a single email. Instantly I'm emailed back with a confirmation that the cash will be in his account in 1 or 2 days. In my experience he'll have the cash tomorrow.

[Keats]

Not entirely sure how different it is in the US but I (UK) can send money from my bank account to a friend's one and he/she gets the money in less than 20 seconds.

[rasz_pl]

>I sent a friend $45 in less than 60 seconds with a single email. Instantly I'm emailed back with a confirmation that the cash will be in his account in 1 or 2 days

Welcome to Europe 15 years ago

[abalone]

It's a big but difficult market. Beyond mom-and-pop shops it becomes more and more like enterprise software with expensive sales and support costs.. only without the enterprise margins.

I wouldn't say Apple Pay is a threat to Square Register. If anything it might even drive POS upgrades which Square could benefit from. Having said that, Square does need to diversify beyond POS systems and payment processing, and Apple Pay puts another nail in the coffin of Square's foray into payment instruments (Square Wallet), which they already pre-emptively killed.

Unfortunately Square Cash operates at a loss. If it were possible not to operate at a loss there'd be a million competitors overnight.

[biot]

In Canada, we've had Interac providing transfers for a number of years. All you need is the person's email address or mobile number and you can send them money with the ability to specify a passphrase to pick it up. Once picked up, the recipient has access to the cash instantly. No delays and, in my experience, no fees either... though that's subject to whatever banking plan you have.

http://www.interac.ca/index.php/en/interac-etransfer/etransf...

[37prime]

Relevant: https://twitter.com/jack/status/509413534862544896

Our millions of sellers will be able to accept any form of payment that comes across the counter, including Apple Pay!

[fubu]

And with the being said, is 6B really that unrealistic of a buying price for Apple to get a quick jump in share of the market? Or for that matter any of the other competitors in the Apple scale space knowing they need to accelerate their offerings in light of Apple Pay?

[netcan]

Somewhat tangental, but I think it's incredible that 1 or 2 days is 'the absolute easiest way to send somebody money.'

You can put $45 in an envelope and have it delivered in 1-2 days.

[chambo622]

I get the feeling that what Square is doing now is just a glimpse of their greater plan. They have a proven ability to execute and release polished products that are enjoyable to use.

Nearly everyone I every need to pay is on Square Cash (and those who aren't soon are, the barrier to signup is very low) and the app is just a pleasure to use compared to the competition. It's second nature at this point.

[abalone]

Cold water:

Square Wallet was a big dud, as was the Starbucks partnership. That was their "greater plan" at one point.

Square Cash is easy to use.. but operates at a structural loss of over 20 cents per transaction.

There's plenty of issues when you look past the surface, particularly with the business model. They have not yet delivered a polished product that's enjoyable to use and makes lots of money.

[idlewords]

You have to hope there's a greater plan, because the one right now is "somehow contrive to lose piles of money at being a financial intermediary".

[yalogin]

Are any of its businesses outside of the POS system successful? Where is it losing all the money?

Don't compare it to the competition. I live outside SF and have never run into any square POS till now and don't know anyone that uses square.

[gonehome]

Most people I know are on Venmo - is square cash better?

[saiko-chriskun]

Square will also be releasing an update to cash with invoicing, reporting, etc. Can't wait :)

[AndrewKemendo]

Looks like they blew past their valuation projections from 2011:

http://www.pitchenvy.com/gallery/square-pitch-deck/

[msoad]

I wonder how this kind of money raising impact employees? (compared to going IPO)

[netcan]

For those that own stock or options earned and vested, it's a weighty validation about the value of that asset. Assuming the there is a core of early programmers that collectively own 5-15% of the stock but are not involved in the financing side of the business, I am sure they feel differently following this investment/valuation. A 0.1% stake is a big deal now.

IPOs of this decade in tech seem to be a different beast. Much bigger. Companies seem to be successfully raising large (+100m+) sums without going to pubic markets.

Understanding the implications of this is beyond my pay grade, but I imagine there are some complex relationships with early employee and investors. IPOs allow stockholders to cash out and the company itself to raise capital. Companies have an alternative way of raising capital which many now prefer. I imagine that all demand for their stock from later stage investors can be channeled into to company's coffers this way without dilution by stockholders.

Either way for employees that have some tenure at Square, being now valued at $6bn is much better than being valued at $600m or $60m.

[letsride]

When Square will open their platform for Indian Users ? Any Idea ?

[kolev]

Totally unrelated: $6B is Bitcoin's market cap times 15.

[kolev]

Edit: "... times 1.5."