Square, the mobile payment start-up co-built by Twitter founder Jack Dorsey, has taken on $27.5 million in new funding to help it compete in the increasingly competitive mobile payments market. The news follows a move by Intuit to discount its GoPayment mobile payment service. With hot competition from Intuit and Verifone, Square has to quickly bulk up if it wants to compete in this space.
The latest funding comes from Sequoia Capital, giving the San Francisco start-up a valuation of $240 million, according to the Wall Street Journal. Square had previously received $10 million led by Khosla Ventures, and is just three months into opening its payment system to the public after some fits and starts. But Keith Rabois, Square’s COO, told the Wall Street Journal the company has already had 30,000 to 50,000 businesses sign up for Square. It’s still too early to know how successful the company will prove to be long-term with its payment system, which utilizes a credit card reader attached to a smartphone. But it’s in an area that’s garnering a lot of attention as companies vie to help consumers and businesses exchange money via their handsets.
With heavyweights Verifone and Intuit competing for a piece of the pie, Square has to not only be innovative, but it also has to gain scale quickly. The funding should help it grow, but also suggests another way out for Square: an acquisition by a player seeking a credible route into the market. With the latest round led by Sequoia, which has strong ties to Google, could the search giant make a move? Google has been pushing near field communications in its latest release of Android and is reportedly looking at building its own payment system. But with the roll out of NFC expected to take some time for merchants to buy the necessary NFC terminals, a product like Square could be an appealing pick-up.
Could eBay, which purchased PayPal and is doing a big business on mobile phones bite? Sequoia’s Roelof Botha, a former CFO of PayPal, is joining Square as a board member, and Rabois also worked for the payments company previously. PayPal already enables credit card payments in its merchant services, but adding Square or a similar service could improve the point-of-sale user experience. Square’s technology takes the old-school way of paying for things with a credit card and pops it onto a mobile device. There are plenty of businesses that might want to buy a bridge to the future of mobile payments.
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