Square to Investors: $1 Billion Valuation? That's So Last Week. Make It $2 Billion.
Square is still working on raising its $50 million-or-so next round of venture capital, and we've heard from several sources why it's taking so long. It seems Square is no longer content …
Context & Ripple Effects
Ten days after reporting that Square was raising a new round to join the billion dollar valuation club, TechCrunch's sources say the company is holding out for roughly double that — about $50 million at a $2 billion valuation — with talks still open.
The ask rests on momentum Square has banked since spring: a strategic investment from Visa in April, card readers placed in Apple's retail and online stores, and confirmed traction numbers of 500,000 readers shipped with $3 million in daily transaction volume as of late May.
First-order effects
- New investors would pay twice last week's entry price for the same stake, so the round either brings in less capital than planned or forces Square to accept more dilution if buyers balk at $2 billion.
Second-order effects
- Visa's strategic position and the Apple retail channel become the de facto diligence case for the higher number — distribution and payment-network backing doing the work that revenue alone cannot yet do at this stage.
Third-order effects
- Repricing a round upward mid-negotiation is a marker of how hot late-stage consumer payments deals have run in 2011, pushing private valuations further ahead of any near-term liquidity event for investors.
The trend: Mobile payments startups are riding a venture market where valuations are being marked up between announcement and close, widening the gap between private paper value and realizable returns.