Updated 1/11/11, 6:27 a.m. to include comment from company.
Payments company Square announced Monday evening that it has closed a $27.5 million Series B round of funding led by Sequoia Capital. Square, co-founded and headed by Twitter co-founder Jack Dorsey, was rumored last week to have raised a large round of funding that would value the young startup at some $200 million, which is just short of the actual valuation of $240 million. The company previously raised $10 million in a Series A round led by Khosla Ventures in 2009, which valued the startup at $45 million, according to sources close to the deal who spoke to the Wall Street Journal.
Since launching in October, the service has been received with great fanfare, and for good reason. By simply signing up and creating an account, users receive a free piece of hardware (a little square the size of a nickel) that they can plug into their iPhones to use as a credit card swiper for mobile (literally) payments. The payee then signs the touchscreen using his or her finger and hits submit, and the transaction is complete.
The beauty of it is that the service isn’t restricted to businesses; anyone can use it. Babysitters, dog-walkers, handymen, or anyone else who needs to make a quick transaction can do so using the Square, which has been hailed by Time Magazine as one of the fifty greatest inventions of 2010. "We have a lot of PTAs are using it for fundraisers," a company spokesperson said via email. "We're also seeing individuals using it to start their own business like being a personal shopper or handyman." The service has seen some strong adoption to date, signing up 30,000 to 50,000 merchants each month. Previously, many of these merchants were restricted to cash only, but with Square, they can now process payments quickly and easily from any card that has a Visa, Discover, MasterCard, or American Express logo.
The service requires no long-term commitment or contract, and each transaction incurs a processing fee of 2.75% plus $0.15 per swipe (for keyed-in transactions, the fee is 3.5% plus $0.15). Users can also refund transactions within 60 days.
Intuit’s GoPayment is a similar mobile payment service that works by attaching a piece of hardware to a smartphone to read swiped credit cards. Other services are also bubbling up in the mobile payments space, such as PayNearMe, which offers a mobile payment solution for cell phone owners and Internet users who don’t have credit cards or bank accounts.
Square could not be reached for comment.
Image source: squareup.com