Square, the new rising star of Silicon Valley founded and led by Twitter co-founder Jack Dorsey, closed a $200 million fundraising round on Monday that now places the start-up's value at $3.25 billion. The privately-held San Francisco based company hopes to establish itself as the go-to mobile wallet in a growing industry of digital payment systems that all seek to turn smartphones into people's primary means of transaction.
Started just three years ago after Dorsey had a conversation with a friend who claimed he lost several thousand dollars in sales because he couldn't accept credit cards from clients (the exact origin story, as explained in a Wired Magazine feature from this summer, is already somewhat disputed), Square has enjoyed a meteoric rise to become one of Silicon Valley's hottest startups, according to the Financial Times.
By 2011, Square had already raised $100 million in similar fundraising efforts, valuing the company at more than $1 billion. It received a hefty investment and ringing endorsement from Starbucks Corp. (Nasdaq: SBUX) when the world's largest coffee chain announced it would invest $25 million in the new electronic payment system and begin accepting Square payments in around 7,000 locations.
One year ago, Square had approximately 150 employees and processed over $1 billion in payments on an annualized basis, said the company on Monday announcing the fundraising success in a written statement. Today, Square has over 400 employees and is processing over $8 billion in payments on an annualized basis.
According to the statement, the latest round of investors included Citi Ventures, Rizvi Traverse Management in addition to Starbucks.
Square added that it plans to use the larger workforce and increased revenue to aid the company's plans to expand internationally in the coming months.
With the new expansion, however, comes fiercer competition for Square. The startup is already squaring off against PayPal, one of the largest ecommerce sites and partner of the well-established eBay Inc. (Nasdaq: EBAY). eBay has already released a triangular-shaped credit card reader to rival Square's four-sided dongle, and just last month it also announced a deal with the credit card company Discover, which gives it access to some seven million merchants that already accept the credit card itself.