3 ms·

Is Mobile Payments Startup Square Worth $200M?

4 points by thinkcomp 16y ago

christophe971 16y ago
We went through this already : Against: "Facebook is not worth $33 billion" http://37signals.com/svn/posts/2585-facebook-is-not-worth-33000000000 http://37signals.com/svn/posts/2585-facebook-is-not-worth-33... For: Everyone who understands market valuation http://news.ycombinator.com/item?id=1720050 http://news.ycombinator.com/item?id=1720050 A detail somewhat in the middle: DHH is mostly saying that these companies should not be worth that kind of money before they have some serious revenue. He's not saying that they will never be worth their current market valuation.
shawnee_ 16y ago
Valuations of individual companies in emerging industries can be tricky. Better questions to explore would be Q(a) "What is the value of the mobile payments sphere?" Q(b) "Is the industry growing, or on the decline?" and Q(c) "Are there any current industry leaders? If so, what percent of the market have they captured?" My take: A(a) Completely speculative; because the valuation of the industry depends upon the adoption of a specific kind of hardware in this case, the valuation of one startup in an untapped sphere is basically irrelevant. A(b) Mobile payments, just like "mobile" everything else, is an industry that is on the incline. Ergo: probably a good industry to play with risk. A(c) Not yet. There will be a "first-mover advantage" for the first company that attains modest adoption (Square seems to be headed there). But there is also a LOT of room for competitors to build a better revenue model that diverges from the traditional one. Square's current business strategy seems to echo the very old-fashioned credit card machine model of making revenue per transaction (which is something that most business owners detest). And an Extra Credit Q: . . . ECQ(d) Is the future headed toward having more buyers or more sellers of the kinds of transactions that a "mobile payments" system would help grow? Some interesting things to think about. ;)
nkurz 16y ago
I've tried using Square as a small business owner, and their model generally makes sense to me. We're not using them for our primary credit card processing needs, though. I think there are still some kinks that they need to work out. The positive: You can be up and running from zero to accepting a credit card within an hour. Compared to the traditional alternatives, this is incredible. Their rates are reasonable. We do slightly better on the interchange-plus merchant account we use, but they aren't bad. The mobile phone card reader is free, and works with both iPhone and Android. The mixed: Their customer service reputation isn't great. If you read their online forums, there a quite a few people that feel they aren't paid promptly. Seems like things are getting better though, and kudos to them for having an open forum! They seem to have trouble getting the devices to people promptly. It seems like it might be worth a negotiating a packet rate with Fedex to get these there overnight, or at least to make sure they get in the mail immediately. The negative: The experience at least on Android isn't great. It feels like an app that was ported by an intern and then forgotten. There's a settings icon that takes you where the menu button should, and the back button doesn't actually work. For example, I started the app right now to refresh my memory, and I'm at the login page and can't figure out a way to get back to the first page without killing the app. The GPS location trick is cute, but can't be turned off. If you are using the phone inside a store, it constantly searches for a GPS signal. The reader (at least on Android) is flaky. It reads a card eventually, but seems to take 3-5 attempts. Worse, if you tap the reader in any way, it thinks you've tried to scan a card. This said, it seems like it's better on iPhone. My advice to them: Raise more money, and spend it on improving the mobile applications and lowering the fees as much as possible. Low cost and simple is great marketing. Somehow get the reader into users' hands the next day after they sign up. And make sure it works. Our current solution: We're using an interchange plus pricing model from http://vantagecard.com http://vantagecard.com. They seem good so far. They resell for Global Payments, who are pretty awful to deal with directly. For our store, we use a wireless Verifone Vx610 --- works, but difficult to set up and expensive. For mobile, we use Inner Fence on Android (free) and iPhone (99 cents) and an Authorize.net Gateway ($10/month). Both are pretty good. We have a $50 iMag Reader for iPhone that works well to scan cards; on Android we have to punch in manually. Which really is to say that we'd love to be using Square if it was a little better implemented. I think they have a decent chance of transforming the market if they can get their act together. Their ease of setup, and the fact that you only have deal with them and not 4-5 different entities, gives them a tremendous leg up. $200M? Yes, if they can pull it off.

4 points by thinkcomp 16y ago

We went through this already : Against: "Facebook is not worth $33 billion" http://37signals.com/svn/posts/2585-facebook-is-not-worth-33000000000 http://37signals.com/svn/posts/2585-facebook-is-not-worth-33... For: Everyone who understands market valuation http://news.ycombinator.com/item?id=1720050 http://news.ycombinator.com/item?id=1720050 A detail somewhat in the middle: DHH is mostly saying that these companies should not be worth that kind of money before they have some serious revenue. He's not saying that they will never be worth their current market valuation.

shawnee_ 16y ago

Valuations of individual companies in emerging industries can be tricky. Better questions to explore would be Q(a) "What is the value of the mobile payments sphere?" Q(b) "Is the industry growing, or on the decline?" and Q(c) "Are there any current industry leaders? If so, what percent of the market have they captured?" My take: A(a) Completely speculative; because the valuation of the industry depends upon the adoption of a specific kind of hardware in this case, the valuation of one startup in an untapped sphere is basically irrelevant. A(b) Mobile payments, just like "mobile" everything else, is an industry that is on the incline. Ergo: probably a good industry to play with risk. A(c) Not yet. There will be a "first-mover advantage" for the first company that attains modest adoption (Square seems to be headed there). But there is also a LOT of room for competitors to build a better revenue model that diverges from the traditional one. Square's current business strategy seems to echo the very old-fashioned credit card machine model of making revenue per transaction (which is something that most business owners detest). And an Extra Credit Q: . . . ECQ(d) Is the future headed toward having more buyers or more sellers of the kinds of transactions that a "mobile payments" system would help grow? Some interesting things to think about. ;)

nkurz 16y ago

I've tried using Square as a small business owner, and their model generally makes sense to me. We're not using them for our primary credit card processing needs, though. I think there are still some kinks that they need to work out. The positive: You can be up and running from zero to accepting a credit card within an hour. Compared to the traditional alternatives, this is incredible. Their rates are reasonable. We do slightly better on the interchange-plus merchant account we use, but they aren't bad. The mobile phone card reader is free, and works with both iPhone and Android. The mixed: Their customer service reputation isn't great. If you read their online forums, there a quite a few people that feel they aren't paid promptly. Seems like things are getting better though, and kudos to them for having an open forum! They seem to have trouble getting the devices to people promptly. It seems like it might be worth a negotiating a packet rate with Fedex to get these there overnight, or at least to make sure they get in the mail immediately. The negative: The experience at least on Android isn't great. It feels like an app that was ported by an intern and then forgotten. There's a settings icon that takes you where the menu button should, and the back button doesn't actually work. For example, I started the app right now to refresh my memory, and I'm at the login page and can't figure out a way to get back to the first page without killing the app. The GPS location trick is cute, but can't be turned off. If you are using the phone inside a store, it constantly searches for a GPS signal. The reader (at least on Android) is flaky. It reads a card eventually, but seems to take 3-5 attempts. Worse, if you tap the reader in any way, it thinks you've tried to scan a card. This said, it seems like it's better on iPhone. My advice to them: Raise more money, and spend it on improving the mobile applications and lowering the fees as much as possible. Low cost and simple is great marketing. Somehow get the reader into users' hands the next day after they sign up. And make sure it works. Our current solution: We're using an interchange plus pricing model from http://vantagecard.com http://vantagecard.com. They seem good so far. They resell for Global Payments, who are pretty awful to deal with directly. For our store, we use a wireless Verifone Vx610 --- works, but difficult to set up and expensive. For mobile, we use Inner Fence on Android (free) and iPhone (99 cents) and an Authorize.net Gateway ($10/month). Both are pretty good. We have a $50 iMag Reader for iPhone that works well to scan cards; on Android we have to punch in manually. Which really is to say that we'd love to be using Square if it was a little better implemented. I think they have a decent chance of transforming the market if they can get their act together. Their ease of setup, and the fact that you only have deal with them and not 4-5 different entities, gives them a tremendous leg up. $200M? Yes, if they can pull it off.