Square, the hot young start-up that is trying to allow any business anywhere to accept credit cards, just landed a marquee investor and a new infusion of cash.
Square said Wednesday that it has taken a strategic investment from Visa Inc. The company declined to comment on the terms. A person familiar with the deal said it was in the "single-digit millions."
The partnership is an important milestone for Square, which said it would help put credit cards in the hands of more individuals and businesses that only take cash or checks. Under the deal, a Visa executive will join Square's advisory board.
In a written statement, John Partridge, Visa's president, said his company "continuously evaluates new technologies and invests in payment innovations that can enable more businesses to accept Visa."
"Square's early success suggests that using Square and a mobile device, new types of merchants will now be able to accept payment and help grow their business via Visa's global network with the security, speed and reliability we provide," he said.
Square closed a $27.5-million round of funding led by Sequoia Capital in January, giving the company a valuation of $240 million, up from $45 million in the previous round of funding.
It's a significant vote of confidence in the company founded by Twitter's Jack Dorsey. Square, launched two years ago, is tackling a fundamental challenge in the world of plastic: About 90% of Americans carry credit cards, yet 27 million businesses in the United States don't accept them.
Dorsey wanted to bring the simplicity of Twitter to the world of mobile payments. So Square built a business around a free tiny, square-shaped credit card reader that plugs into the headphone jack of an iPhone, Android phone or electronic tablet. Basically Square turns cellphones into credit card readers.
Unlike many plans set up between small businesses and credit card companies, Square charges the same fee to everyone. And Square doesn't rely on typical means of evaluating credit worthiness, making the service available to more merchants.
Square is playing in one of the hottest markets to emerge from this Internet boom. It has a host of smart, deep-pocketed competitors, including Intuit with its GoPayment service.
It also has run into some challenges. There's heated litigation as well as competitors pushing their own version of credit card readers that attach to phones and questioning the security of Square's service. Also, as Square grows, it may have more exposure to risk and fraud.
But none of that seems to be slowing its growth. Square opened up its service in October. It's now signing up nearly 100,000 businesses a month, according to Chief Operating Officer Keith Rabois, an early PayPal employee and former vice president of business development at Slide who came on board last summer to help Dorsey run the company. He declined to say specifically how many customers Square has, but noted that several hundred-thousand merchants are now using Square.
Square last week also landed a deal to put its credit card reader in Apple's 235 U.S. stores.
Now it's getting Visa's seal of approval. The credit card company had signaled its interest in Square in a blog post about mobile payment services on Valentine's Day.
"We couldn't think of a better partner," Rabois said.
Visa could also help Square with its ambitions to expand internationally, he added. Square already has 85 staffers and is on track to more than double that by year's end.
Dorsey, in the meantime, is pulling double duty. He's back at Twitter as the company's executive chairman at a crucial juncture for the popular Internet service. Dorsey was ousted as Twitter’s chief executive in 2008,but he remained on the board. He's considered by many to be one of the top product innovators in Silicon Valley.
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-- Jessica Guynn
Top photo: Jack Dorsey, co-founder of Twitter and Square, speaks at the Columbia University School of Journalism in New York on March 29, 2011. Credit: Jin Lee/Bloomberg
Bottom photo: The plastic card reader from Square plugs into a headphone jack. Buyers swipe credit cards through it to send payment data to an application on an iPhone or iPod Touch. Credit: Robert Andersen/Square