Square Expects New Financing and a Loftier Value
For all of Square's challenges, raising money has not been one. — Square, the mobile payments start-up best known for its pint-size credit card reader, is close to raising roughly $200 million, which would give the company an implied valuation …
Context & Ripple Effects
A year after Square's $100 million round at a $1 billion valuation led by Kleiner Perkins in June 2011 — a number TechCrunch reported the company was already talking up toward $2 billion within weeks — the payments start-up is close to raising roughly $200 million more at an implied valuation well above that mark.
The groundwork has been visible for months: Square confirmed hiring a new CFO in June 2012 while reportedly shopping a $250 million round at $2.5–4 billion, and disclosed in April that payment volume had risen 25 percent since March. The brand fight with rival mPowa, including a confirmed cease-and-desist over copied hands imagery, shows the category heating up even as the money flows in.
First-order effects
- Square gains roughly $200 million in fresh capital and a valuation mark several times its June 2011 figure, giving it war chest and currency for expansion while competitors like mPowa remain sub-scale.
Second-order effects
- Rival mobile payments players face a competitor that can now fund hardware giveaways, merchant acquisition, and product pushes like the upgraded encrypted card reader and Card Case without near-term revenue pressure.
Third-order effects
- If late-stage investors keep marking payments start-ups on volume growth rather than revenue, the sector consolidates around one or two heavily capitalized brands, squeezing out imitators before they reach scale.
The trend: Private-market capital is chasing mobile payments at sharply escalating valuations, turning funding speed itself into a competitive weapon for the category leader.