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To me the biggest question is what, exactly, Square does? Years ago they were the company that made it easy for people to accept credit card payments who other

To me the biggest question is what, exactly, Square does? Years ago they were the company that made it easy for people to accept credit card payments who otherwise wouldn't want to / be able to (mom & pop stores, farmers' markets, etc). But you don't build a multi-billion dollar company just there, it seems that the margins are too thin and the volume just isn't there to make up for it. Since then, they've done their Point of Sale device (not just the dongle), which I haven't heard much about. They also have their small-business-loans side--are they a bank / lending agency? They say that it's technically not a loan, but it's close enough for me. They also do (did?) payroll services for small businesses? I guess when I look at them I see them with a lot of irons in the fire, but with none of them doing particularly well. To me it seems like they've tried a bunch of things, none of them has really stuck, so they want more money to...do what? Keep trying them? Full disclosure, I worked for a company for a few years that was in a similar-ish space, so I am probably biased against them. We fought a lot of similar battles, of trying to create a margin inside of credit card margins, and I'm fairly convinced that it's not a way to scale a billion dollar business.

x0x0 11y ago
In the bay area, a good deal of the restaurants I eat at use square. So do the farmers markets, food trucks, and my coffee shop. I probably personally spend $200 a month through square and $50 through breadcrumb, so there's room to grow.
- seekingcharlie 11y ago
  Key words being 'bay area', which is in no way representative of the market Square needs. Another challenge for Square is that their core merchants are mom & pop coffee shops or like you said, food trucks - not particularly lucrative segments. Square's POS can never compete with full-service POS (Aloha, Micros), and even in the quick-service market there is increasing competition (Clover POS, Revel etc). That's why they've moved into payroll, HR, time-tracking, albeit the $5 per employee is ridiculously expensive for SMB's.
  - x0x0 11y ago
    Square will obviously have to grow more, but the reason I think they have a future is they're getting merchants who didn't take cards to take them, easily and cheaply. My family is not on the coast and there's still a lot of places that don't take cards for whom square should be a really good solution. Then they can do the classic microsoft strategy: start with the smallest/cheapest and relentlessly move upmarket. Will they ever be the solution for Safeway with hundreds of stores and a very complex discounting system? Probably not. But there's a lot of smaller businesses. Small to medium restaurants should be a key target customer.
  - enjo 11y ago
    Here in Denver I see it all the time. I actually don't really notice it (a problem for them as so many competitors directly cloned them)... until that email receipt arrives. It's not ubiquitous here, but it's certainly common.
antiffan 11y ago
I'd like to see them get into the enterprise space and build a subscription management platform in the same space as Zuora. They certainly have the domain expertise, design, and engineering talent to do this.
numlocked 11y ago
Re: their small business 'loans' -- with the caveat that I am not an expert: The "loan" distinction is important not for semantic reasons but practical one -- they are offering small businesses cash advances. These are different from loans because they are not secured. There are no assets put up as collateral. However Square believes they can do this better than other services because they can effectively secure the advance by taking a piece of each card swipe at the merchant's point of sale system. But if the business goes under, Square has no claim on any assets. I don't totally understand why/when merchant cash advances work, but I believe that adequately captures the 'how'.
- x0x0 11y ago
  Seeing a business' cash flow should give you great insight into their ability to repay. Just a few of the things you can calculate that a bank can't: microtrends in income, repeat customers (and trends thereof), changes in transaction size as well as volume, etc. Plus it's easier to collect on that loan.
  - TheSpiceIsLife 11y ago
    I don't follow why a bank can't see cash flow? I live in Australia, and here almost everyone is using PayPass by MasterCard or PayWave by VISA - both are contactless PINless card payments. All those transactions have to go in to the merchants bank account.
    - x0x0 11y ago
      Um, sure -- but they get bulk deposited, not individual transactions. The merchant account is what sees the individual transactions, and that bank generally isn't the one businesses go to for loans afaik.
      - TheSpiceIsLife 11y ago
        Oh yeah, true. Excuse my ignorance. Although in Australia the merchant banks also do business lending.
airza 11y ago
I see their PoS everywhere. It works super well, too.
- angersock 11y ago
  It's not enough to be ubiquitous and useful in today's market. Think of the unicorns.
  - jeffdavis 11y ago
    It depends on how you structure your business. If you structure it for hypergrowth, then maybe not.
jweir 11y ago
They are also in the food delivery business https://www.trycaviar.com/about-us https://www.trycaviar.com/about-us
- nemothekid 11y ago
  TIL. I had no idea Caviar was a product of Square.
  - spectralblu 11y ago
    It isn't. They were acquired: http://techcrunch.com/2014/08/04/its-official-square-acquires-food-delivery-service-caviar/ http://techcrunch.com/2014/08/04/its-official-square-acquire...
    - BinaryIdiot 11y ago
      Which means it is now :)
sytelus 11y ago
Square as well as Stripe have really changed PoS space. Before they arrived, the devices for PoS were truely ugly, unfriendly, hard to acquire and hard to use. I see tons of small businesses converting their PoS devices to Square/Stripe ALL the time. They are like iPhone for PoS. The potential is massive. They get huge amount of transaction data which alone is probably worth a billion dollars (customer habits, usage pattern, targeting, BI etc). They can easily expand in to integrated inventory, accounting and tax system which is well beyond billion dollar industry by itself. If you visit any super market or traditional retail space, one thing that would immediately catch your eyes is arcane PoS that literally runs on Win2000 based CE code. Even though it is super critical for running business, innovations in this space have been few and far between. if you have ever even tried to use any small business accounting/tax/inventory software you would know how pathetic and 1990-ish these software are. Given small businesses have limited resources, expertise and savvyness, this space is ripe for disruption. If there was easy to use, realtime, scalable, well integrated PoS system with smart customer focused analytics putting great business intelligence on fingertips of moms and pops, it would be worth its weight in gold for businesses owners. Square/Stripe could easily outpace SAP and Oracle in market cap/revenues if they play their game right and target this market with full force. The cut in credit card translations is small and probably irrelevant part of the story.
- notJim 11y ago
  I think the problem is that though Square really did change things there (I agree w/ you), the space now is very competitive with a lot of different players, and it's not clear what Square can do that their competitors can't. It doesn't seem like there's really much lock-in or network effects that are helping them out.
  - sliverstorm 11y ago
    At least for a while they had powerful brand name recognition and a head start. Bigger, badder competitors (i.e. VISA) seem like they haven't been interested in competing with Square, and you can leverage momentum & recognition against smaller newcomers.
sliverstorm 11y ago
It seems like a good strong business could have been built on the initial function of accepting credit card payments. What if (I wonder) Square had stuck to that and not tried to become a huge multi-billion dollar company? There's lots of room in the world for modestly sized companies making respectable profits.
pbreit 11y ago
I agree that their product set is unfocused to their detriment. But I would disagree that core payment processing is small or low margin. In fact, their margins are north of 30%. And small business payment processing is massive even without considering international and online, two massive areas where Square has completely dropped the ball. I don't love the lending business because it seems a bit outside their competency but I can understand continuing it since it's currently hot and they do have decent visibility into borrower ability to pay, etc.
DeBraid 11y ago
> To me the biggest question is what, exactly, Square does? Years ago they were the company that made it easy for people to accept credit card payments who otherwise wouldn't want to / be able to (mom & pop stores, farmers' markets, etc). tldr: Long Shopify, short Square.
erikpukinskis 11y ago
I would look at https://squareup.com/appointments https://squareup.com/appointments as an example of where they can go. Basically, small business services of all kinds are on the table. Their job is to make it easy to run a small businesses. The first product was the little reader you put in your iPhone. It's been expanded since then, but the market is essentially "everything that small business owners struggle with".

x0x0 11y ago

In the bay area, a good deal of the restaurants I eat at use square. So do the farmers markets, food trucks, and my coffee shop. I probably personally spend $200 a month through square and $50 through breadcrumb, so there's room to grow.

seekingcharlie 11y ago
Key words being 'bay area', which is in no way representative of the market Square needs. Another challenge for Square is that their core merchants are mom & pop coffee shops or like you said, food trucks - not particularly lucrative segments. Square's POS can never compete with full-service POS (Aloha, Micros), and even in the quick-service market there is increasing competition (Clover POS, Revel etc). That's why they've moved into payroll, HR, time-tracking, albeit the $5 per employee is ridiculously expensive for SMB's.
- x0x0 11y ago
  Square will obviously have to grow more, but the reason I think they have a future is they're getting merchants who didn't take cards to take them, easily and cheaply. My family is not on the coast and there's still a lot of places that don't take cards for whom square should be a really good solution. Then they can do the classic microsoft strategy: start with the smallest/cheapest and relentlessly move upmarket. Will they ever be the solution for Safeway with hundreds of stores and a very complex discounting system? Probably not. But there's a lot of smaller businesses. Small to medium restaurants should be a key target customer.
- enjo 11y ago
  Here in Denver I see it all the time. I actually don't really notice it (a problem for them as so many competitors directly cloned them)... until that email receipt arrives. It's not ubiquitous here, but it's certainly common.

antiffan 11y ago

I'd like to see them get into the enterprise space and build a subscription management platform in the same space as Zuora. They certainly have the domain expertise, design, and engineering talent to do this.

numlocked 11y ago

Re: their small business 'loans' -- with the caveat that I am not an expert: The "loan" distinction is important not for semantic reasons but practical one -- they are offering small businesses cash advances. These are different from loans because they are not secured. There are no assets put up as collateral. However Square believes they can do this better than other services because they can effectively secure the advance by taking a piece of each card swipe at the merchant's point of sale system. But if the business goes under, Square has no claim on any assets. I don't totally understand why/when merchant cash advances work, but I believe that adequately captures the 'how'.

x0x0 11y ago
Seeing a business' cash flow should give you great insight into their ability to repay. Just a few of the things you can calculate that a bank can't: microtrends in income, repeat customers (and trends thereof), changes in transaction size as well as volume, etc. Plus it's easier to collect on that loan.
- TheSpiceIsLife 11y ago
  I don't follow why a bank can't see cash flow? I live in Australia, and here almost everyone is using PayPass by MasterCard or PayWave by VISA - both are contactless PINless card payments. All those transactions have to go in to the merchants bank account.
  - x0x0 11y ago
    Um, sure -- but they get bulk deposited, not individual transactions. The merchant account is what sees the individual transactions, and that bank generally isn't the one businesses go to for loans afaik.
    - TheSpiceIsLife 11y ago
      Oh yeah, true. Excuse my ignorance. Although in Australia the merchant banks also do business lending.

airza 11y ago

I see their PoS everywhere. It works super well, too.

angersock 11y ago
It's not enough to be ubiquitous and useful in today's market. Think of the unicorns.
- jeffdavis 11y ago
  It depends on how you structure your business. If you structure it for hypergrowth, then maybe not.

jweir 11y ago

They are also in the food delivery business https://www.trycaviar.com/about-us https://www.trycaviar.com/about-us

nemothekid 11y ago
TIL. I had no idea Caviar was a product of Square.
- spectralblu 11y ago
  It isn't. They were acquired: http://techcrunch.com/2014/08/04/its-official-square-acquires-food-delivery-service-caviar/ http://techcrunch.com/2014/08/04/its-official-square-acquire...
  - BinaryIdiot 11y ago
    Which means it is now :)

sytelus 11y ago

Square as well as Stripe have really changed PoS space. Before they arrived, the devices for PoS were truely ugly, unfriendly, hard to acquire and hard to use. I see tons of small businesses converting their PoS devices to Square/Stripe ALL the time. They are like iPhone for PoS. The potential is massive. They get huge amount of transaction data which alone is probably worth a billion dollars (customer habits, usage pattern, targeting, BI etc). They can easily expand in to integrated inventory, accounting and tax system which is well beyond billion dollar industry by itself. If you visit any super market or traditional retail space, one thing that would immediately catch your eyes is arcane PoS that literally runs on Win2000 based CE code. Even though it is super critical for running business, innovations in this space have been few and far between. if you have ever even tried to use any small business accounting/tax/inventory software you would know how pathetic and 1990-ish these software are. Given small businesses have limited resources, expertise and savvyness, this space is ripe for disruption. If there was easy to use, realtime, scalable, well integrated PoS system with smart customer focused analytics putting great business intelligence on fingertips of moms and pops, it would be worth its weight in gold for businesses owners. Square/Stripe could easily outpace SAP and Oracle in market cap/revenues if they play their game right and target this market with full force. The cut in credit card translations is small and probably irrelevant part of the story.

notJim 11y ago
I think the problem is that though Square really did change things there (I agree w/ you), the space now is very competitive with a lot of different players, and it's not clear what Square can do that their competitors can't. It doesn't seem like there's really much lock-in or network effects that are helping them out.
- sliverstorm 11y ago
  At least for a while they had powerful brand name recognition and a head start. Bigger, badder competitors (i.e. VISA) seem like they haven't been interested in competing with Square, and you can leverage momentum & recognition against smaller newcomers.

sliverstorm 11y ago

It seems like a good strong business could have been built on the initial function of accepting credit card payments. What if (I wonder) Square had stuck to that and not tried to become a huge multi-billion dollar company? There's lots of room in the world for modestly sized companies making respectable profits.

pbreit 11y ago

I agree that their product set is unfocused to their detriment. But I would disagree that core payment processing is small or low margin. In fact, their margins are north of 30%. And small business payment processing is massive even without considering international and online, two massive areas where Square has completely dropped the ball. I don't love the lending business because it seems a bit outside their competency but I can understand continuing it since it's currently hot and they do have decent visibility into borrower ability to pay, etc.

DeBraid 11y ago

> To me the biggest question is what, exactly, Square does? Years ago they were the company that made it easy for people to accept credit card payments who otherwise wouldn't want to / be able to (mom & pop stores, farmers' markets, etc). tldr: Long Shopify, short Square.

erikpukinskis 11y ago

I would look at https://squareup.com/appointments https://squareup.com/appointments as an example of where they can go. Basically, small business services of all kinds are on the table. Their job is to make it easy to run a small businesses. The first product was the little reader you put in your iPhone. It's been expanded since then, but the market is essentially "everything that small business owners struggle with".