

Square to Investors: $1 Billion Valuation? Make It $2 Billion. - pbreit
http://techcrunch.com/2011/06/17/square-to-investors-1-billion-valuation-thats-so-last-week-make-it-2-billion/
Getting frothy!
======
blhack
It's strange to me that you're not a "big deal" anymore unless you have a
valuation in the Billions of dollars.

Not saying square isn't valuable (they're my favorite new company, and the one
that I think will go the farthest), just making an observation.

~~~
Timothee
Perceptions (and valuations) have shifted a lot in recent years, and, as the
article points out, the "Billion dollar club" is getting crowded.

YouTube was bought for $1.6B after all. That was a _huge_ deal then. When
Zuckerberg refused the $1B offer from Yahoo!, that was also a pretty big deal.
Now we see a few young companies at these valuations, so, the perception is
different.

~~~
nir
You might ask, what objectively changed since those days when $1B was
considered a huge deal? If not a lot, then we're in a bubble.

~~~
jackowayed
Much of the new billion dollar club is special in that it actually has the
kind of revenue and revenue growth to at least sort of justify the valuation.
It sounds like Airbnb, Dropbox, and Square have serious profits with trends
suggesting that they'll be even bigger soon. These startups look more like
PayPal, which was a 1.5B acquisition where Ebay totally and unsurprisingly got
their money's worth, rather than a social site with no revenue. (Did YouTube
have any revenue when they were bought? And I think Facebook had ads, but they
were still losing money fast when they were offered 1B.)

Even though it's looking like YouTube will pan out for Google, it's a lot more
obvious that Square has the potential to be worth billions than that YouTube
did.

------
ThomPete
The sad reality is that if it wasn't Dorsey behind this it would have to prove
itself like any other business.

My guess is that you haven't solved payment if you have to get additional
hardware. and even if that get solved what is to hinder Apple and Google from
offering it natively which it should be.

~~~
olivercameron
Did you see Card Case? No hardware, apart from your mobile phone required:
<http://squareup.com/cardcase>

------
aashay
Now Square just has to figure out a way to disrupt the market for ATM machines
in "Cash Only" businesses. There are dozens of local business in Square's own
San Francisco that, even given a novel payment solution like Square, refuse to
accept credit cards and opt instead to host on-premise ATM machines.

------
deltapoint
Many of these deals may have special terms as well. At a minimum VCs will get
1x and at times 2x or 3x of the first money made. That way, VCs can protect
their downside while investing in some of the companies that have the biggest
potential.

That being said, these valuations are still quite high.

------
jdp23
about that bubble ...

~~~
potatolicious
Normally I'd agree. Spotify for $1B? Jesus.

But, assuming you believe Square can pull off what they're trying to pull
off... a billion-dollar valuation is not hard to justify. I mean, these guys
could be bigger than PayPal, all things executed correctly that is.

~~~
jdp23
Agreed, there's huge potential upside if it all goes well. PayPal was acquired
for $1.5B. A $2B for Square (at its very early stage, with a part-time CEO)
seems pretty bubblicious to me.

~~~
chrisedge
I would have to disagree with the comparison of PayPal and Square. I find that
there are similarities, but there are much more profits to be found in
enabling businesses to bypass the hardship of being able to process cards
(which can be both time consuming and costly). I think the valuation of Square
to be reasonable, considering that in that they are early-stage and are
already processing three million dollars per day (which is increasing). Though
the valuation of Spotify at one billion dollars is just plain ridiculous.

------
thinkcomp
This is pretty ridiculous given that Square's market is a tiny fraction of
retail, its distribution model is expensive, and it doesn't solve any of the
problems with the payment industry. Granted, I'm a competitor, but $2 billion?
Even $1 billion is absurd.

Sigh.

~~~
erikpukinskis
You do realize "retail" is a multi-trillion dollar segment, right?

~~~
thinkcomp
Yes. That's why I'm in it covering the 99.99% of cases that Square's 0.01%
solution misses.

~~~
ryannielsen
Investors aren't looking at what Square's offering now; they're looking at
what Square can reasonably offer in the future, soon enough that their
investment is "worth it". Square may only address 0.01% of the market now, but
they might have a realistic plan for addressing 0.1% or 1% or 10% of the
market, making them a billion to multi-billion dollar company.

If Square is able to convince investors that they've got mass market appeal
then they can justify a multi-billion dollar valuation. Considering Visa
invested an undisclosed amount in Square, they may actually have reason to
command such a large valuation.

------
chailatte
I think techcrunch writers are following the "AOL Way" of writing articles.
(Although the occurrence of 5 foursquare articles in a day has stopped
recently) I guess they're under pressure to sell their massively
overpriced/slightly useful conference.

Jack Dorsey pantless in Paris? Who knew.

