BY EVELYN M. RUSLI
Square, a mobile payments company, announced Monday that it had raised $27.5 million in a new round of financing led by Sequoia Capital.
The deal, which includes several private and strategic investors— like Khosla Ventures and Jeremy Stoppelman, Yelp’s chief executive — values the start-up at $240 million, according to a person close to the deal who spoke on condition of anonymity because he was not authorized to speak publicly. A Sequoia partner, Roelof Botha, a former chief financial officer for PayPal, will join Square’s board.
The start-up, co-founded by Jack Dorsey, Twitter’s chairman and co-founder, has seen its valuation soar in a short period of time. In late 2009, Khosla Ventures led a $10 million investment in Square, at a more modest $45 million valuation.
Square spars with companies like Intuit and VeriFone, in the increasingly competitive market of mobile payments. The company offers a free reader that plugs into mobile devices, turning compatible cellphones into credit card scanners. Although the attachment and software are free, users pay a small percentage of each transaction to Square. The service is geared toward smaller merchants who are looking to avoid regular credit card processing fees.
Since offering its service in October, the company has added 30,000 to 50,000 new merchants a month, according to Keith Rabois, Square’s chief operating officer. While Square processes millions of dollars worth of transactions each week, Mr. Rabois predicts adoption will pick up sharply this year. “We would like to end the year processing billions of dollars of transactions on an annual basis, with millions of businesses in the U.S.,” he said.
Square is the latest in series of technology start-ups that have been able to secure large investment rounds. Groupon announced Monday that it had locked up $950 million from a large group of investors. This month, Facebook raised a total of $500 million from Goldman Sachs and DST Global; Goldman is also raising $1.5 billion from its client for a separate special purpose vehicle to invest in Facebook shares. And Mr. Dorsey’s other company, Twitter, raised $200 million at a $3.7 billion valuation in mid-December.