Square payments – a device that plugs into an iPhone or iPad and turns it into a credit card terminal. Today this brainchild of Jack Dorsey’s is worth $3.25 billion having raised another $200 million in its fourth round of funding.
To put that in to perspective Square is worth more than Hiscox ($3.1bn) the 66 year old International insurer , Groupon($3bn) the popular online deals site and over double De La Rue ($1.6bn) the the world’s largest integrated commercial banknote printer.
Stacking Square up against something a bit closer to home, Global Payments is valued at around $3.4 billion but is nearly 13 times larger, processing $167 billion vs Square’s $8 billion. Whilst Global Payments had net revenues of $2.2 billion in 2011 according to a recent article from PrivCo, Square’s 2012 revenue is expected to be 300% higher than the 2011 revenue of $42.5 million. And that last point is probably a clue to why it’s valued where it is.
2 factors investors are obviously keen on in in the Square story are its growth and its partnerships. Square has tie ups with Visa, Chase and most recently Starbucks giving it the coverage, expertise and customer reach that many believe will fuel it’s future growth.
As Business Insider puts it:
The strategic relationships, especially in light of the 13x revenue difference between GPN and Square, seem to have added more than $2 billion to Square’s valuation. Evidently both the investors and the strategic partners are betting that they can help build Square into a company that doesn’t just replace GPN, but actually grows market 3-4x in size.
And it’s this partnership with Starbucks that could be the most interesting of the lot as it begins to focus it’s efforts away from just taking payments to include making payments as well. A bold move and one which Dorsey, at a recent appearance in San Francisco, described as:
aiming to make Pay with Square the Amazon 1-Click of offline commerce.
Ultimately, if Square can beat off the pack of other start-ups and the established payments businesses who are scrambling to get into the market it created the valuation is probably on the low side. Exciting times!