Square: An mCommerce startup set for growth
by Blake Stuchin
Square is a mobile point of sale (POS) system for mobile devices that enables individuals to accept credit card payments. In layman’s terms, it’s a little credit card reader that plugs into a phone’s headphone jack and syncs up with an app on your phone. Like a mobile, physical PayPal, but easier. You can find more details about how Square works here.
Square is a mobile point of sale (POS) system for mobile devices that enables individuals to accept credit card payments. In layman’s terms, it’s a little credit card reader that plugs into a phone’s headphone jack and syncs up with an app on your phone. Like a mobile, physical PayPal, but easier. You can find more details about how Square works here.
Square’s management team has the deep technology and entrepreneurial experience building products that scale that will be necessary for Square to grow. Square is run by Twitter co-founder Jack Dorsey. The company’s investors and advisors include former Facebook CFO Gideon Yu (in his first investment as a member of Vinod Khosla’s Khosla Ventures), digg’s Kevin Rose, FourSquare’s Dennis Crowley, Napster founder Shawn Fanning, and, perhaps most influentially, Ron Conway (an investor in or an advisor to Google, Facebook, PayPal, and Twitter among many others).
Square was launched in December 2009. It is currently is in a trial run for a limited number of beta testers and currently works just in the United States on iPhones and iPads. To suggest that it will grow significantly in two years is not tough because growing from, say 100 beta testers to 1,000 users is 10x growth. But while that may be called “significant,” it won’t be game-changing unless it’s scalable at the level of, well, the other companies run by its founders and advisors. Given the expertise of this team at marketing products via both traditional and new media channels and growing those products from hundreds of users to millions, I believe that Square can be successful.Mobile payments, and in particular micropayments, are already a fast growing source of barter and currency exchange, particularly in emerging markets where cash may be dangerous to carry and/or non-existent. In the developed world, mobile POS systems have existed for more than a decade but have always been cost prohibitive for individuals and many small businesses. Square, on the other hand, charges no monthly fees or activation fees, just a flat rate for transactions (2.75% + 15¢ for swipes and 3.5% + 15¢ for keyed-ins). The reader is free and small enough to carry around everywhere.
The merchant processing end of transactions has always been expensive and immobile for vendors. If you want to see mobile payment processing, walk into any Apple Store and use one of the modified iPhones with credit card readers affixed. But even those devices are heavy and singularly designed. The brilliance of Square is that it’s cheap and portable. Square can be used in farmer’s markets, with food trucks, or by friends lending each other money (or paying it back). As the founders describe it, “Square was born out of necessity. In February 2009, [co-founder] Jim McKelvey wasn’t able to sell a piece of his glass art because he couldn’t accept a credit card as payment. Even though a majority of payments have moved to plastic cards, accepting payments from cards is still difficult, requiring long applications, expensive hardware, and an overly complex experience. Square was begun to change all of that.”
The X factor here, of course, is security. Square’s team will have to convince the world that using Square is as safe as handing your credit card to a waiter in a restaurant or keying it in to a website online. Once safety is addressed, they’ll need to convince that same audience to sign up and get Square. It’s a massively tall order, but the team that’s involved is as qualified as any to pull it off. If they do, Square will grow massively in the next two years.