Square, a service that lets anyone with an Android or iOS device accept credit card payments, received $100 million from venture capitalist Kleiner Perkins Caufield & Byers.
This also brings Square’s valuation to $1 billion. This is the third round of funding. Back in January they raised $27.5 million and the company was valued at $240 million.
The first question is where are these values coming from? Right now there are 500,000 Square readers that have been delivered. There are 1 million transactions processed per day for a total of $3 million. Square’s take is 2.75% so they are generating $82,500 in revenue per day for a total of approximately $30 million annually. How does $30 million annually equate to a $1 billion valuation?
The second question is where does Square fit in with Near Field Communications (NFC) evolving? In a few years, Google Wallet and other NFC options will be in full swing. NFC lets you make mobile payments by simply holding your phone within 4-inches of another phone or receiver. Eventually, most phones will have NFC chips in them and if they don’t, there is always the option of applying a sticker. Using Square requires a reader that goes into the headphone jack. Is there a future for this?
There is no question that whatever success Square has enjoyed is because of co-founder Jack Dorsey, who created Twitter. He has also brought on board, Mary Meeker, a partner at Kleiner Perkins, Larry Summers, a former Treasury secretary and a chief economic adviser to President Obama, and Vinod Khosla, a well-known green technology venture capitalist.