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Mobile payment service Square is reportedly looking for additional funding and is prepping for a valuation at the crazily high level of $4 billion, according to a report from AllThingsD.
The report cites multiple anonymous sources, and notes that Square will have quadrupled its value in just 10 months. Back then, it raised $100 million at a valuation of $1 billion. As a point of comparison, consider that before it was sold to Facebook, rumor had it that Instagram was looking at a valuation of $500 million. AllThingsD says negotiations are still ongoing, however, and that Square’s valuation could come in somewhere lower than $4 billion, although any figure would probably be incredibly high for a three year-old company.
The idea behind Square is a fairly ingenious one. The company provides a free mobile app for Android and iOS devices and sells a small add-on credit card reader to go with it which plugs into the headphone jack of most mobile devices. That reader allows merchants to use the app to accept credit card sales. Square seems to be extremely handy for merchants, giving them the option to continue to offer credit card capabilities even when they’re selling things at conventions or festivals, for example.
Square’s business has been expanding pretty rapidly over the last two years, as well. More than just the credit card reader capabilities, it now offers Android and iOS apps that effectively turns the device into a cash register and a virtual wallet app for the iPhone. Last year, Square reported it was processing $3 million in mobile payments every day. Last month, it reported it was responsible for $4 billion in annual transactions.
Despite the fact that Square is moving a whole lot of money, $4 billion is still a very high valuation. A good comparison is PayPal, which went public at a valuation of $800 million and was sold to eBay for $1.5 billion shortly thereafter. As AllThingsD reports, “At the time it went public, the company was roughly doubling year-over-year and had generated $103.7 million in 2001, its first full-year of operations — or slightly less than Square’s estimated revenues.”
Still, Square is doing extremely well, even if it does have some tough competition to face in Google and its Wallet service and others, such as PayPal. Hopefully before long, we’ll know if it’s doing well enough to warrant a $4 billion valuation, and we’ll to see what it’ll do with the funding it receives.