Hacker News new | past | comments | ask | show | jobs | submit login
Square files for IPO (squareup.com)
327 points by nikunjk on Oct 14, 2015 | hide | past | favorite | 204 comments

  We generated net losses of $85.2 million, $104.5 million, and $154.1 million 
  in 2012, 2013, and 2014, respectively. As of December 31, 2014, we had an 
  accumulated deficit of $395.6 million. For the six months ended June 30, 2015, 
  we generated a net loss of $77.6 million. As of June 30, 2015, we had an 
  accumulated deficit of $473.2 million. 
Could someone explain the motive to go public while operating in the losses? Isn't the public market more averse to companies operating in the negative.

Also wouldn't the timing act more as a distraction for Jack?

Basically there are three reasons to IPO, one you are "forced" into it because the number of individual investors has crossed a predefined threshold of 499, second you are scaling the business and this gives you access to the public markets for capital, or third you are running low on cash on hand and nobody is willing to lead a new round with your current structure.

Given the wailing and gnashing of teeth this time last year [1] when Square raised $150M on a $6B valuation, it is entirely possible this is their last change to raise capital. If it doesn't work, and they can't cross the line into operationally cash flow positive they will become one of the larger unicorns to die this season. I really hope it isn't the case because I love their product and their service, but the S-1 doesn't paint a picture of hope. Doing some back of the envelope calculations I can't see any scale where they are profitable given their current fee structure.

[1] http://www.theverge.com/2014/10/6/6918211/square-funding-sin...

A somewhat off-topic FYI, but the JOBS Act increased the private holder cap from 500 to 2,000 shareholders as long as no more than 499 of them are accredited.


That's, uh, pretty weird actually. It means you have to know whether your RSU'd employees are accredited investors to know whether you have to go public?

Nah, there's a line that takes care of that;

> The new rule excludes from these calculations people who obtained equity under the company's equity compensation plans and investors who purchased securities pursuant to the crowdfunding exemption discussed in this alert.

That's the reason for the R in RSU. It's not an actual SU until liquidation event.

Minor nitpick: it's actually the U that makes it not actually stock. Owning Restricted Stock counts as being a shareholder, but Restricted Stock Units aren't Restricted Stock.

> Doing some back of the envelope calculations I can't see any scale where they are profitable given their current fee structure.

“We lose money on every sale, but make it up on volume”

So they keep their current fee structure as long as possible to build volume then switch over to something that will make money when there is no way to further raise funds?

That's some funny math right there.

Welcome to Silicon Valley

> I can't see any scale where they are profitable

What are your calculations? Square, Stripe et al are making massive margins on debit card transactions right now. Thanks to recent regulations (the Durbin amendment), the average debit interchange fee is 0.89% all included.[1] Square charges 2.75%. That means they're netting around 1.5-2% on debit transactions. That's huge for a payment processor.

Sure, they have higher costs for credit cards, and their easier sign-up probably means more losses from seller-side fraud. But if they can control fraud then 2.75% is still a healthy gross margin even on credit transactions. And it's crazy big margin for debit.

[1] http://www.federalreserve.gov/paymentsystems/regii-average-i...

What percentage of their transactions are debit transactions, though?

A lot. In the U.S. debit is over 40% of transactions and growing.


Those aren't Square specific numbers, though.

> Doing some back of the envelope calculations I can't see any scale where they are profitable given their current fee structure.

Here is a more optimistic analysis from Re/Code: http://recode.net/2015/10/14/squares-ipo-filing-its-complica... that looks at the numbers minus the Starbucks deal and concludes that their core business is healthy and has a path to profitability.

Thanks for that, this comment is worrisome from the article

"While Square will be a much smaller business from a revenue standpoint after the Starbucks deal lapses, it will be a faster-growing one with a much better shot at profitability."

So what is their target valuation when they go public? If they were going for $1 - $2B valuation? I think the world might buy that, but since their last round was at $6B, their investors would probably be pushing for $10B (because if you recall the Box IPO you remember that none of the late stage investors want to take a down round into the public markets) and that is like "Square 10 years from now" valuations.

So lets watch this one closely and see if they can get commitments for all their shares on the road show. And if not, we'll probably see a giant recapitalization or maybe a firesale to PayPal or something.

Agreed, that is the biggest challenge for them, and the First Data IPO (which is probably the best comp for them) has been challenging.

OTOH Square is on pace to hit $1B revenue / year and growing quickly vs. anybody else in the processing space, but it will all come down to how the market thinks about their business and their ability to cross the chasm from very small merchants (which makes up the majority of their business and they have locked up because other processors / ISOs cannot compete with their customer acquisition costs) into the next tier of small businesses...

Along those lines, great article from Bill Gurley about revenue multiples: http://abovethecrowd.com/2011/05/24/all-revenue-is-not-creat...

Doing some back of the envelope calculations I can't see any scale where they are profitable given their current fee structure.

Could you explain? I'm sure you have much more experience reading such numbers[1] than I do, but at a glance they look viable if they can grow to something around double their size.

Ignoring Starbucks and doubling the amounts for 1H 2015 to make it annual, they'll have about $1000M of revenue from transactions, and will pay about $600M of transaction costs. They'll have about $500M of operating costs for 2015 and $100M of various other costs.

If in 201X they were to be double this size, they'd have $2000M of revenue, and $1200M of transaction costs. If they can keep their operating and other costs below $800M, they'll be profitable. Of their expenses, "Transaction and advance losses" will probably scale linearly, but all the rest plausible to be significantly sublinear.

Is this simplistic scenario clearly impossible for some reason?

[1] https://www.sec.gov/Archives/edgar/data/1512673/000119312515...

Most of those losses are because Square subsidizes the actual cost of credit card processing (i.e. charges stores less than what Visa charges). There are a bunch of ways to mitigate this:

- the termination of the Starbucks agreement in 2016 (this already saves $27 million/year based on the 2014 numbers)

- raising flat-rate processing fees for businesses in the future

- reduce the cost of transactions by adding more fraud-prevention measures that make credit card processors happy (e.g. Chip and PIN)

- create a new business that allows Square to cut out the credit card networks by owning both sides of the transaction

- create a new business using the information from being in the credit card processing flow that is profitable enough to subsidize the credit card processing

Right now, I suspect they're trying to "pull an Amazon" -- they're operating at a loss, but they hope investors will like the brand and the vision enough that they'll put money in anyway.

> charges stores less than what Visa charges

Their flat rate of 2.75% is substantially more than what Visa charges for "card present" transactions. The highest cost cards are 2.4% but they're going to be a small portion of most stores' card mix. I'd think most shops cost Square 1.1-1.5% across all their transactions. Debit volume exceeds credit volume in the US -- most people are swiping their bank check cards, not commercial purchasing cards and the highest end reward cards that require pristine credit -- and the Durbin amendment capped the interchange fee on debit cards (when swiped a-la-Square Reader) at 0.05%+$0.21 per transaction. That means 2.75% is 98% profit for Square on a big debit card swipe.


The only place Square's subsidizing the transaction fees is on very small purchases where the flat ~$0.15 of the interchange fee amounts to more than 1-2% of the total transaction, and with AmEx where, if Square hasn't negotiated better than sticker rate, they could be paying 2.85-3.5% depending on business type.

If they're losing money on the one thing they charge money for, what's the business? And how are their competitors doing it? PayPal's historically offered merchants with volume as low as 1.9%. They offer 2.7% flat rate (no per-transaction flat fee either) for their swiper.

On a percentage basis that's true, but if the transaction is small, such as a $3 coffee, then the actual debit fee is (($3 x 0.05%) + $0.21) ~= $0.22, but Square would only charge $0.0825 in fees. I suspect those losses add up at the transaction volume that Square sees.

paypal got onto our website by offering 2.3%, matched our CC fees.. received an email about a month ago [1] to 2.9% thinking about removing them - I am frustrated.


Whilst interchange is indeed the largest part of processing costs, there are still assessments (0.13%) and brand fees (FANF, cross border fees (1.25% for Visa), etc) that increase the cost of processing over interchange.

Square can only hope to make a decent margin on its 2.75% pricing by 1. seeing a preferred distribution mix on card types (such as, high debit card usage; less Amex; less expensive rewards cards; high cards qualifying at card present rates & no downgrades) and/or 2. special interchange discounts with the networks based on growth initiatives and/or fraud tools.

If they can't generate enough $$ from processing revenue, they'll need to use card processing as a loss leader for other services (loans, analytics, marketing)...

In Ashlee Vance's "Elon Musk" book, Elon discusses this very issue with Square drawing on his own experiences with PayPal. Elon states that the notion of controlling both sides of the transaction, or better put, how to avoid the end user from withdrawing from their digital bank account is what he criticizes most about Square. He believes that, like PayPal, they have to create new ways for users to be able to utilize the money Square is holding onto for them by either creating businesses around say a Square-owned debit cards (ala PayPal debit card), extending the payment capabilities to partners, and essentially, just finding ways to keep the transactions within their network is what is going to practically eliminate most of their costs.

I'm about a third through the book. I like a lot of the content but I do not like how Vance ties most things to Musk's ego - even when they are hardly related and seemingly would have barely crossed Musk's mind at the time. He often seems to intentionally paint a darker picture where the facts don't warrant it.

Probably false. It has been reported that gross margins on Square transaction processing are around 30% which is believable at its 2.75% fee.

I keep waiting for Square and Dwolla to merge in some form as that seems like a great way for Square to start cutting out the credit card companies.

Dwolla is an extraordinarily unscrupulous business.

They marketed their service for years as 'free from chargebacks' and then (without notice!) silently deleted transactions which had, in fact, been charged back: http://venturebeat.com/2012/03/07/tradehill-sues-suing-dwoll...

Dwolla is nothing more than a fancy front-end on top of a credit union in Iowa. I tried to use it for my business back in 2011, but it was just too slow -- takes 2 weeks for money to get in (1 week transfer from their bank account to Veridian and 1 week from Veridian to your bank account) and 2 weeks for money to get out (same in the other direction). Very disappointing.

Harassed as many people as I could for information on FiSync so I could try to offer integration to local credit unions and banks and couldn't get any real information out of them on it; it was a phantom program back when I was looking.

its a bit different these days.

I know Dwolla's FiSync protocol is being adopted by more banks and is zero-cost, but for Square to provide the consumer coverage most merchants expect they would have to wait for FiSync to get to a much larger scale.

How would Dwolla help Square cut out the CC companies?

I think FiSync and Square both benefit from a vertical merger (I'm considering then to be in separate market spaces rather than competitors; which certainly could be debated). Both get a near term benefit of the expanded customer base which should help them expand. FiSync would benefit Square as would Dwolla Credit as a credit card alternative

Credit cards won't be immediately replaced as they are accepted virtually everywhere. I think Square could be positioned well to replace credit cards though using the old Microsoft model of embrace, extend, extinguish.

Embrace credit cards in the short game. Extend with direct payments (bank to bank and alternative line of revolving credit). Extinguish; pull the plug on the credit card companies once they achieve high enough rate of adoption.

I recently read how Salesforce is worth nearly $50 billion but has never turned a profit[1][2].

[1] https://en.wikipedia.org/wiki/Salesforce.com [2] http://www.npr.org/sections/money/2015/10/09/447249562/episo...

Salesforce did a lot of acquisitions worth billions of dollars.

Looking at their financial statements, net loss for last FY was 250MM but depreciation and amortization was over 700MM.

In other words, the loss they show is just a paper loss. They make money. Unlike Enron which was making paper profit but they were actually losing money.

>Looking at their financial statements, net loss for last FY was 250MM but depreciation and amortization was over 700MM. In other words, the loss they show is just a paper loss. They make money.

If they consistently do this then they're not making money. Depreciation/Ammortization is just an accounting method to distribute investments over time. If you're consistently returning a net loss it's not just a timing issue. In this case maybe Salesforce is like Amazon and continuously reinvests free cash flow so they don't return a profit to shareholders and instead reinvest it into new business. Is that what you mean?

Yeah, that's exactly what I mean.

Wall street rewards growth over profits so incentives for Salesforce are to keep purchasing businesses which at least break-even (e.g. Heroku) which in turn show growth in revenue but don't necessarily translate into growth in profits.

As long as Salesforce keeps buying these businesses, they can keep showing paper loss forever without actually being in any danger of running out of cash. And while they are doing this, their shareprice might double or triple.

It sounds crazy that it actually works but I'm not the one who is going to argue with markets.

> Wall street rewards growth over profits

That's not true, or at least it's only partially true. In the end, Wall street values discounted cash flow. As Bill Gurley has said:

> So growth is good, correct? There is a reason to save growth for last. While growth is quite important, and even thought we are in a market where growth is in particularly high demand, growth all by itself can be misleading. Here is the problem. Growth that can never translate into long-term positive cash flow will have a negative impact on a DCF model, not a positive one. This is known as “profitless prosperity.”

In other words, as long as you can show sustainable double digit growth, you can afford to value based on growth. If you don't and all of the sudden you can't maintain a positive DCF, the Street will hit you hard. SFDC, Amazon, etc are all teetering on the brink of collapse and equally becoming the next Walmart/Exxon.

[0] - http://abovethecrowd.com/2011/05/24/all-revenue-is-not-creat...

>It sounds crazy that it actually works but I'm not the one who is going to argue with markets.

It can be a great tactic if the businesses you build/buy are the same your shareholders would buy with the dividends you'd pay out since you'll save them some taxes. Since the mother company can also hope to add some value to the businesses it buys the end result can be quite interesting. Buffet's Berkshire is based on this kind of setup.

It means the business has positive free cash flow; it takes in more money than it spends in a year (i.e. it's not going bankrupt), but the paper value of assets it owns (largely intangible goodwill from acquisitions) is written down, meaning that they take a loss.

This is generally a win, if you're expanding, because it means you pay no tax on your free cash.

>It means the business has positive free cash flow

Note that this isn't necessarily true. You can have negative Net Income, positive EBITDA but negative FCF (what really matters).

showing a paper loss when you are actually profitable means you are overspending short term. It is not healthy for a business. It is no different than a person with a good job and salary who is hundreds of thousands in debit. You are basically spending future money that you have no earned yet. In the case of startups that future money is VC money

If they are spending their own money then they are not in debit...it is only if they are borrowing. Either case it is a paper loss except in the former case the example you give is reversed.

If you know how to create value by investing money, you should do that. If you've run out of ideas or expertise, by all means, profit.

A share price reflects the future value of the company's profits, not the past value. If the investing public believes that a large infusion of cash from the IPO will help you achieve profitability, they'll gladly invest.

Look at a company like Amazon, their net income was stunningly negative for a very long time [1] -- it's barely positive today -- yet their market cap is north of $250B. There is plenty of room for companies making losses to go public if they have a realistic plan to make profits in the future.

[1] - http://i.imgur.com/M9igHQK.png

Same logic as angels and venture capital... you don't buy for profit, you buy for growth. As long as their growth numbers are great, profit numbers don't have to be.

In 2012, they lost $85m. In 2014, they lost $154m. How much bigger are were they in 2014 relative to 2012? If it's more than 2x (and I have no doubt it is), they're on the right track. If they're 5x bigger, they're doing fantastic - revenue growth is outpacing red ink growth by a healthy margin. That means sooner or later, they'll not only be profitable, but tremendously so.

Square is a category-killer, in a key category.

"That means sooner or later, they'll not only be profitable, but tremendously so."

Says who? Growth is great, but it doesn't necessarily mean that profits are in the pipeline (e.g. Groupon).

And on top of that, what exactly is it that Square does that it's going to be profitable on? Is it the Point of Sale devices? Is it their Square Readers? Is it their small-business loans? They're not a terribly focused company, and maybe that's a reflection of their CEO doing double-time (completely speculation on my part).

Personally I see this as their last-ditch effort to grab some cash, to exit before the market gets worse. Their investors don't want to be left holding the bag when the IPO market gets cold, so it's better to cash out now while the name Square is worth something than to bet that they'll get bigger/better in the future.

What is a category-killer? From what I can tell, they are a middleman to another middleman (you could call them the third wheel), only one of which has the leverage in this world (it's not Square).

We read about them because... I'm not too sure actually, I guess it's because they are burning VC money and have a splendid website.

I should add that, as a customer of Square's customers, I breath a sigh of relief every time I see a restaurant or small business using Square for point of sale. It means I'll get email receipts, that I won't have to calculate tips, that I'm unlikely to get mischarged, that my credit card info isn't passing through some half-assed amateur homebrew system, etc. It means I'm not trying to understand whether to push X or the green button for credit rather than debit, it means I can write a nice signature with my finger rather than some terrible low-res scratch with a bad plastic pen in a tiny box, etc.

As someone who uses other people's payment systems, Square makes me happy. It's a product that respects the users.

I'm a happy Square user too.

But too bad we don't actually make them money.

Point of sale. They're building toward a monopoly on point-of-sale devices in small businesses. A lot of restaurants and locally owned shops have ditched their old registers in favor of Square registers, and Square gets a cut of all their sales. They can expand outward from there, getting into the enterprise market for chains, replacing the ugly, expensive bloatware.

Really complex retailers with broad product lines, like supermarkets and big box retailers, will continue with highly customized in-house solutions. But for retailers with only dozens or hundreds rather than thousands of products, and limited budget to buy fancy solutions, it's a godsend.

And, because the customers are making a major, high-risk, customer-facing commitment, they're going to be very sticky, very unlikely to switch. Basically, Square is entering a market where the established players are too slow and coarse-grained to reach a lot of potential customers, and then they'll have a terrific barrier to entry. That sounds like a good deal to me, from an investment point of view.

A lot of restaurants and locally owned shops have ditched their old registers in favor of Square registers

Some citations would be nice

Do you go to independent restaurants or small businesses? Here in Minneapolis, where "buy local" is a serious thing, we do it all the time. But if you only shop and eat at national chains, you won't see it.

I'm always curious why it's seems it's always this Hail Mary play, in attempt to win the lottery.

It's betting on a future, and the future is unpredictable.

"Too Big To Fail" is not the terminology I would ever want towards something I develop - I think Titanic.

I understand that businesses do not start out profitable from the get go, but $700 million in debt?

First Data, the largest merchant acquirer (spun out of AMEX years ago) is going public on Thur. with $18B in debt. They were taken private 7 years ago for $30B. Go figure.

Edit: Here's First Data's S-1:


Well that sounds like a classic LBO style series of events, which should be in a separate category from IPOs that are reached through somewhat more natural means.

We've already seen this. It's going to be spectacular failure.

Here are some reasons that could be at play.

1. Shove it through while public market sentiments are still positive and accepting or riskier bets.

2. The numbers can only look worse in the future.

The fact that the company is in the red, in itself, is not a reason to stop going public. Companies like FireEye are in the red but have multiplied in market cap since going public.

> Companies like FireEye are in the red but have multiplied in market cap since going public.

FireEye debuted at $20. It hit a peak of ~$85 shortly after the IPO. Its closing price today is $28.76.

As of September, 40% of the companies that went public in the past year with market caps above $1 billion were below their offering prices[1]. The market for IPOs has become even tougher since September. Just look at Pure Storage[2] and CytomX[3].

In my opinion Square is getting out to market while they can.

[1] http://www.bloomberg.com/news/articles/2015-09-14/many-of-th...

[2] http://www.wsj.com/articles/pure-storage-trades-below-ipo-pr...

[3] http://www.bizjournals.com/sanfrancisco/blog/biotech/2015/10...

> Could someone explain the motive to go public while operating in the losses?

The motive is to raise capital. The same as the motive to go public any other time.

> Isn't the public market more averse to companies operating in the negative.

In very broad terms, on average, sure, probably. But there's lots of factors in how the public markets react to a firm's offerings, and profitability is far from the only consideration.

Lots of good answers on here, but I'll just add the minus the horrible Starbucks deal (which may have been worth a shot, but is killing them now) they're very close to being profitable and may achieve that very shortly.

"we lose money on every sale, but we plan on making it up in volume" (TM)

This is a really honest question:

How do you sleep at night being the founder of a company with half a billion dollars in deficit? How do you go to work everyday? Is this "normal"? Is this expected?

I really don't understand how that situation can happen.

Edit: I just looked up their numbers. They have large revenues, but still. Such deficits would scare me.

Remember Amazon went public in '97 and took another 4-5 years to turn a small profit. To answer your question, smart investors are more concerned with the long term strategy than whether the company is turning a profit in the present moment. It is far from uncommon to raise a bunch of capital from the public market to invest in growth.

This is not a comment on Square's prospects, but their business model is clearly one that is betting on getting to very big scale before turning a profit.

Where did your inline quote come from? I tried googling the first line and it just led me back to your comment.

Thank you! Page 26 if anyone else was wondering.

The bet here is that as opposed to a good value company (which can kick off an occasional dividend based on its profits) it's a growth company, and the opportunity here is to capture future growth. AMZN is a similar proposition.

I suspect the gameplay is something different. Square when IPO'd will be in position of strength to make some waves of disruption in the market. That in itself will set Square to be the King of payment systems.

What if Twitter was going to be packaged up for sale, or already was, and there was a buyer lined up for a sale within 3-6 months?

That buyer would have to be insane. Other than a pivot (Periscope?), there is no 17bn dollar business there, only a circle jerk and bot traffic.

So, it's like HN?.

On a more serious note:

Twitter has a large following of powerful/smart people who don't leave over night. Sure, over time these people could leave, but why would they? What would a twitter competitor offer that twitter can't offer?

The primary function of an IPO is to raise money.

What are you using logic for? This is the next Jobs we're taking about.

> All executive officers and directors as a group (13 persons) .... 61.5%

LOL 13 people in the company own more than half. The thousands of employees get to split what's left after investors.

13 people will become BILLIONAIRES and centi/multi-millionaires, while the rest of the company that toiled for years gets (maybe) a down payment on a 1800sqft house on the peninsula.

Meanwhile everyone rails against wall street inequity and the Walton family and whoever else...

Those aren't individual holdings (except for Jack and a couple of the small ones). They're holdings of VC firms which in turn means they're holdings of various large LPs.

Uhh, all these people are individuals: https://squareup.com/about#leadership and don't appear to be "representatives / holdings of VC firms".

See those little numbers next to the names? Those are references to footnotes. Try reading the footnotes.

With that tone you could at least link to the document you're referencing (not the same one that the above poster linked to):


The table on page 176 is what I assume you're referring to.

Granted the tone was a little sarcastic, but IMO that was largely in response to the parent comment starting with "uhh"

> 13 people will become BILLIONAIRES and centi/multi-millionaires

I think you mean "hecto" rather then "centi". A centimillionaire has assets worth on the order of $10,000.

Centimillionaire is commonly used to refer to someone with assets of $100 million or more. From dictionaries, to lay people, to business publications, it's practically universal.

I understand what you were aiming for, however centimillionaire is the correct usage.


"A Deceased Centimillionaire Leaves $1.2B To Save Parts Of Rust Belt America" http://www.forbes.com/sites/abrambrown/2015/07/22/a-deceased...


"Unlucky Echelon of Ex-Centimillionaires Sees Stakes Plunge as Net Craze Fades" http://www.wsj.com/articles/SB972002051942176166

"A Deceased Centimillionaire Leaves $1.2B" But that person is a billionaire. =|

Maybe it's $1.2B of Evernote RSUs?

Centimillionaire does sound better than thousandaire, however.

Many engineers seem to either be blissfully ignorant or just way too trusting during equity negotiations. Seems pretty common to just snow them with big absolute numbers and not even mention shares outstanding.

I know a guy that took a CTO role at a company post-YC acceptance but pre-demo day for ~5%. I can't imagine what the rest of the crew is getting. Why even join a startup at that point?

I've frequently seen advice that equity offers dangled to prospective employees in a pre-public company should be valued at $0/share, because of the uncertainty of any opportunity to realize any value from them, the possibility of dilution before the company becomes public, etc.

If that advice is followed, it sort of naturally follows that there is no real rational reason to be particularly aggressive during equity negotiations, and that trading equity for other compensation is a smart move.

> I know a guy that took a CTO role at a company post-YC acceptance but pre-demo day for ~5%. I can't imagine what the rest of the crew is getting. Why even join a startup at that point?

Because the immediate pay and benefits, rather than the speculative equity gamble, is good, and because the work is what you want to be working on. And maybe you like the people/culture, too.

Personally, I think you either should disregard equity altogether or accrue as much as possible if it'll be of a reasonable size.

If it should be priced at $0/share, then I'd like to have 100% of it, please :-) Oh, but wait.... the founders want to get mega-rich if it succeeds!

There is no inherent conflict between working on what you like with good people/culture, and also sharing fairly in the mega-riches in the remote possibility the thing is successful. But for some reason, employees routinely accept terms where they'll still be just making ends meet (at least in silicon valley, a million is barely a house) even if the company is so successful that the founders get to university buildings named after them.

How much of their own capital did the employees risk?

A few years of their lifes, an extremely limited and finite resource.

Since we're talking about specific sums of money, how much is that time worth? You have to put a number on it one way or another.

If we wanted to be arbitrary about it, we could pretend that a janitor's time is worth a trillion dollars per hour because said janitor's time is a finite resource that can never be recovered. However that doesn't do much for you when you have to actually decide how to pay a janitor.

The trick is he never mentioned what that time is worth. All he said was those few years of life was worth a few years, which were limited and finite.

If we wanted to be arbitrary about it, we could pretend that a janitor's time is worth a trillion dollars per hour because said janitor's time is a finite resource that can never be recovered. However that doesn't do much for you when you have to actually decide how to pay a janitor.

It sounds like as a serial entrepreneur you like to decide how to pay janitors, because you can buy a few years of their time for a relatively low cost that you can turn into wealth for yourself.

When a janitor is working, he isn't working for $4 an hour or whatever it is you pay him. He's working for the rent & the food that will keep him alive, so that he will have time to continue to living, and that time is valuable to him. That's what he's getting paid, and that's why he's willing to work for you for $4. Just because it costs you nearly nothing to hire some people for an hour doesn't their time is worth only $4. It's worth a lot more than that. $4 can buy enough calories to last for days, and that time will be spent with his friends, family and his children(? possible if in India), and that's called "intrinsic goods", something money alone can never buy, because money only buys you time to acquire those goods.

Years of their skills and labor that could have been spent working at another company (including competitors).

If they exercised their options and paid tax then potentially a significant portion relative to their net worth.

directors rarely invest their own money in the company

For venture firms lack of GP's own money in the fund, though, is signaling "misaligned incentives". Some firms (Benchmark comes to mind) also have had funds where it was nothing but GP money, no LPs.

Oh, I meant senior execs at the funded company, not the VC partners.

61.5% to the 13 directors and 33.6% to investors = 95.1% Everyone else = 4.9%

At a $6B valuation, that's $294M for everyone else.

That's actually not terrible. Looks like they have about 1000 employees, so that would be $294,000 per employee on average. Obviously a normal distribution will skew this pretty heavily so that the first 50 or so employees get most of the money and everyone else gets progressively less. Seems to be about normal for payouts on exit, though.

$294,000 -- Average employee

$1,500,000,000 -- Jack (25%)

$828,000,000 -- directors/execs combined (38.8%, per jwegan's comment), minus Jack.

Jack himself will get as much $$$ out of Square as all his employees combined.... times FIVE.

The other 12 directors execs will split a pot that's over twice as large as all 1000 employees combined.

That's cool for you, a 5000-to-1 discrepancy between CEO and avg employee? That's the reward system that we should all embrace in this modern age? How is it any different from the cigar-chomping tophat-wearing magnates of the past? Yeah, today the founders wear cool jeans and turtlenecks, and employees DO take home a nice little down payment, but the huge dropoff between the billionaire and the rank-and-file is as disgusting as ever.

What specifically is wrong with it?

Jack had (I assume) something that was 100% his in the beginning (or his and Jim McKelvey's - I don't know the story). They built something of value. They gave parts of it away, as well as cash, to people in exchange for doing things for them. Over time, the company that he owned continued to gain value, because people were willing to pay money to that company for the service it provided. At each point, every customer they served and every employee they took on presumably thought they were getting a good, fair deal. (If you're not getting a good deal, don't do business with someone.) At the end, the thing he owned was worth $1.5B.

What should have happened differently? In some alternative universe, perhaps everyone all along the way, every possible employee, could have demanded a larger percentage of the equity in return for their labor. But they didn't. I don't see why it's necessarily reasonable to, from the outside, say that anything is wrong, and reach in and start redistributing wealth. People can probably become billionaires today more easily because technology scales better than in the past, and because there's an investment environment that supports it.

Imagine I found a company solo. All by myself. I provide a service that lots of people are willing to use, and they're willing to pay me for. Maybe I've cracked the problem of Strong AI, and I'm selling my AI's services. It's software, and it scales well, so before long my company is worth $1B. I'm still running the company all by myself. How should it play out? If I brought on an employee at some point as a sysadmin should they automatically receive a percentage? (If they negotiated for that, then yes, otherwise no.)

That is incorrect. The shares of Khosla Ventures and Sequoia Capital are shown both in the "5% Stockholders" and again shown in the "Executive Officers and Directors" section since both firms also hold seats on the board. Also, investors holding <5% stake are not represented.

The real math is 33.6% to investors holding a >5% stake, 38.8% to execs & directors, and 27.6% not represented (probably a mix of investors and the employee option pool)

Why are you looking at the % and not the $ value that they'd earn? 39.5% isn't a small amount either, whatever that will convert to in $ value.

Was that a question for me, or why not looking at $$ earned per person instead of the %?

Well, what is your opinion of the $ and % that non-founders get at startups (regardless of success)?

Legitimate question being downvoted. Thumbsup..

> In the third quarter of 2012, we signed an agreement to process credit and debit card payment transactions for all Starbucks-owned stores in the United States. The agreement was amended in August 2015 to eliminate the exclusivity provision in order to permit Starbucks to begin transitioning to another payment processor starting October 1, 2015. Under the amendment, Starbucks also agreed to pay increased processing rates to us for as long as they continue to process transactions with us. We anticipate that Starbucks will transition to another payment processor and will cease using our payment processing services prior to the scheduled expiration of the agreement in the third quarter of 2016, and, in any event, we do not intend to renew it when it expires.

In addition to the $150 million loss in 2014, looks like the revenue side doesn't look too good either. From their operating data,

Total revenue = $707.8 million

Starbucks revenue = $123 million

So they would likely lose > 17% revenue very soon.

Starbucks is broken out explicitly - Revenue for SBUX $123 million and it cost them $150 million to process, so they were losing $27 million / year on the Starbucks partnership. The rest of their business is quite different, so losing that partnership makes them stronger, not weaker, as you are implying.

> So they would likely lose > 17% revenue very soon.

It looks like they loose money on every single Starbucks transaction. Sounds like a good thing.

This pattern, ie. a large loss making enterprise client seems very common. I wonder if its because companies like Starbucks can regularly out negotiate small companies, or if it ends up being a fair trade for the brand value of having them as a client.

At this stage it's not about profit...it's about volume. They need to become so big that their scale takes care of profit problems. So it's terrible that they're losing such a huge customer.

Volume isn't the only thing in CC realm. Visa, MC, AMEX charge a pass-through rate. If the deal with Starbucks didn't push the pass through rate and charged south of 10 basis points, then they're not making money but still have to spend money on infrastructure.

Companies that act as gateways are not making large chunks of cash so every basis point matter.

edit: spelling, structure

Sure, but you need to burn until you become part of the oligopoly of Visa, AMEX, Mastercard, Discover. Square is offering cheaper transaction rates through better technology - that's the only reason a company would switch to them over the big 4 in the first place. They'll bring down rates for everyone, but at some point they need to find their place as one of the big 5, at which point equilibrium rates will be high enough for them to turn a profit. This means they need large accounts, they need volume, they need credibility, they need to own a big chunk of infrastructure. Even if they're losing money on it now.

If I'm a potential customer and I see Square losing its Starbucks account and 17% of its revenue I'm going to be somewhat wary of its ability to exist in 3-5 years, and then I'll have to incur costs of switching back to some other payments processor.

>until you become part of the oligopoly of Visa, AMEX, Mastercard, Discover

I thought their competitors were First Data, Vantiv, Total Systems Services, Global Payments, and Heartland Payments Systems, etc. Does Square issue cards/ credit? It's not clear everybody in this discussion has the same facts.

Edit: Replaced pronoun with proper.

Its way, way more complex then that. Please see my answer above. Square's competition is stripe and paypal...

And all the new "mobile" payment platforms coming out. Companies you mentioned are HUGE and some are subsidiaries of larger banks.

All of the companies I mentioned are not subsidiaries, they are publicly traded, independent companies. A few of them were spun out of banks at one time (e.g. Vantiv came from Fifth Third). In your other comment you say that First Data is part of Bank of America, which is completely wrong.

First Data just started trading today under the ticker NYSE:FDC where they were taken private by KKR in 2007. Prior to that they were spun out of AMEX back in 1992.[0]

>Its way, way more complex then that

Please don't do this. I worked in the industry for 5 years and have quite a firm grasp of it (it's only been 8 years since, and the industry hasn't changed much).


Looking into it further, I think I made a mistake. It was my belief that PaymentTech and BAMS are corps but instead they are "alliances". First-Data owns x% of the BAMS alliance which is different then BAMS of BoA fame.

Also, I had no idea that FirstData went public, in my dealings with them, I always delt with Bank of America Merchant Services, which acted as if First Data was their subsidiary. This opinion came from reading our BAMS contract.

Coming from the merchant's side of things, and dealing with this for over a decade, it "feels" more complicated. However, considering you were on the inside, your first-person version is more accurate.

Hope you didn't take offense.

I'm going to attempt to answer you in the best way that I can, however, I would like to post a disclaimer: Credit Card processing is an incredibly shady/grey business with several companies fighting for a fraction of a basis point per transactions.

The big 4, as you put it, have very little to do with the actual processing of credit cards. They are the "finish" line of a consumers transaction. In between a consumer and the credit card company, there will be a terminal/pos vendor, a data vendor, a gateway, and a processor. Every single one of those folks takes a cut. In addition, all of those companies are part of larger conglomerates.

So, if you go to your favorite burger/salad/sushi/coffee place, their system will take your credit card, will have another company (like Datawire) create a secure connection to a gateway (lets say First Data) and then hand it off to the processor (BAMS), who will then process your credit cards but not fund them. Once the batch is processed, then the credit card companies will fund your account.

So Square is trying to "disrupt" this business, and create their own connection. However, it's not in AMEX/VISA/MC/Discover's best interests to deal with them. In addition, BAMS (Bank of America Merchant Services), Payment Tech (Chase), and AMEX run processors as a subsidiary, and then gateways (First Data) are parts of their conglomerate. First Data is part of BAMS, WorldPay is joined NCR/VISA/MC and VisaWorld is Visa/MC/Discover.

This is outside the "large" players like Heartland that process a tremendous amount of information.

Square is successful because the "pie" is huge, and growing every day. More and more people are using mobile payment and plastic vs Cash. With increased competition, basis points are king. ONE basis points on 3,000,000,000 in transactions is only 300,000. So for a company to bring in 1,000,000 they would have to essentially process a trillion dollars based on a single basis point commission.

I can go on and on about this giving you exact figures and numbers but I hope I've earned enough "trust" for you to believe me that sometimes letting go of 17% of your total revenue will actually bring you more cash.

Think of it like a bar that fired the bartender who gave away all those drinks. Yes, less people and less money in the drawer but more profit =D

Good summary, but you are confusing First Data's role - First Data is a processor, not just a Gateway, and is actually the processor for BAMS, Wells Fargo, and many other banks. (http://digitaltransactions.net/news/story/First-Data_s-Allia...)

Thanks for sharing that article. The CCP world is so convoluted that when I start thinking "I got it", I realize the rabbit hole keeps going.

Here are two articles for anyone who is interested in learning more:

[0] : https://www.quora.com/What-is-the-difference-between-a-payme...

[1] : http://www.chetu.com/blogs/finance-2/choosing-between-paymen...

Their competitors are public and are floating in money but aren't investing in technology to lower transaction costs. Ask yourself why. Its not like their competitors don't have money, people, or a desire for profit. Or "the market" isn't interested in middlemen spending money they have (or don't have) to improve their tech, so why would joining "the market" be part of the strategy for a company trying to advance transaction tech? The market doesn't want them to do what they've been doing. So they'll have to pivot, essentially. Into... what? And the what doesn't matter because whatever it is, its not their secret sauce.

Their transaction costs are lower than their competitors because they're losing money. I'm sure AMEX would have cheap transaction costs if they were willing to lose staggering amounts of money. I could form a startup to sell gasoline for $1/gallon over the internet. Sure I'd lose tons of money, but look how cheap my gas is compared to BP. Well of course BP is earning a profit whereas I'm losing money on every gallon, but I'm sure after the IPO...

They have some traction in very discretionary consumer spending. Not the best place to be in the start of a recession. And public policy has been, is, and will be, to concentrate as much money as possible at the top while draining it out of the bottom. Why would you open a new Ferrari dealership in Detroit? Or rephrased the digital money of the future for farmers markets is EBT "food stamps" cards, not an iphone app. That discretionary money being spent at the coffee shops and farmers markets is "supposed to" by policy all go to .edu, bank mortgages, and health care. The economy is trying to destroy the sector they are trying to middleman off of, good luck with that long term. They're sailing the wrong direction at the customer level.

Speaking of competitors... well why even comment in detail about each. The problem with payment middlemen isn't so much that they're there as a class, its that there's so many identical ones. In my alternate life as a volunteer treasurer for a non-profit everyone wanted digital donation/payment processing, however everyone wanted a different one, and I am SO not going to jump thru those hoops, so its cash and checks only. Its like insisting I open a bank account at every branch in the metropolis, good luck with that. Maybe we need a middleman for the middleman to manage the middlemen.

I hate to imply history is repeating but this is pretty much Flooz again, isn't it? Those who don't know history are doomed to repeat it?

Your comment is solid but it "feels" jaded. The credit card fee "pie" is HUGE. There is room for square and many other alternatives.

As you've said, there is a middle man of the middle man who manages the middle man. That's not Square's bread and butter. They're going after the low hanging fruit: small businesses, food trucks, flee market sellers, etc.

They can't compete in the POS world but they can get theirs.

However, you are foreshadowing something else, in my opinion: Square is the small fish nipping at the large pie while the big fish are swimming away from Sharks. If Square attempts to grow too quickly or expand too fast, they'll get swallowed up. They won't be bought, just forced out of business.

I think they can have value, but in 10 years - slow and steady.

$-1/transaction * 1,000,000 transactions vs $-1/transaction * 1,000,000,000

At which stage? They're going public, they're not a startup anymore. If they're still high growth they'd be going after another funding round instead of an IPO.

At the stage of still being unprofitable. Just like Twitter and Amazon, which are also both public companies.

Filing for an IPO does not mean you're slowing growth...it's just an alternate form of fundraising that allows a different mix of investors to join in on the fun.

Twitter is pretty much a counter example. They have a terrible time being profitable despite their size and their stock is getting hammered for it.

Amazon is a different beast because they live at the razor's edge of profitability and have for years. Square is not close not to mention they're competing with entrenched competitors.

Historically that was not true at all. This cycle it has been true, but I'm not sure if that is because of increase compliance cost post Sarbox, increased risk of activist investors choking off growth, or increased availability of private capital.

"Total revenue = $707.8 million"

Somehow that seems wrong to me... Is Square counting money-through-the-system as revenue? Is that what it is? To me it feels like their revenue would be their cut of the money that runs through the system, so some small percentage of the $707m. Is this a common thing to do, in this area?

$707m is their cut of the money that they process. I think it was approximately $24bn of money that went through the system.

Ah, excellent, thank you!

No, that has to be their cut. If they're taking 3% then it's absolutely conceivable that they are processing $23 Billion. Visa and MasterCard process multiple trillions of dollars a year.

Coming from a world that deals with credit card processors, their deal with Starbucks could have been a sweetheart deal and causing some of their losses. If they're loosing money on the deal, they could potentially reduce their loss.

Credit card gateways, like square, take a fraction of the transaction during processing. If their deal did not include the pass through rates of Amex, Visa, MC and those companies raised rates, that would be coming out of Squares pocket.

"I believe so much in the potential of this company to drive positive impact in my lifetime that over the past two years I have given over 15 million shares, or 20% of my own equity, back to both Square and the Start Small Foundation, a new organization I created to meaningfully invest in the folks who inspire us: artists, musicians, and local businesses, with a special focus on underserved communities around the world. The shares being made available for the directed share program in this offering are being sold by the Start Small Foundation, giving Square customers the ability to buy equity to support the Foundation. I have also committed to give 40 million more of my shares, an additional 10% of the company, to invest in this cause. I’d rather have a smaller part of something big than a bigger part of something small.

We intend to make this big! Thank you for your support and potential investment in Square.


These were probably given as options and at the current market price rather than Jack's super low strike price.

How do you make something valuable? Convince others it has value, and do it with only 20% of your stake.

Come on..

Jack already gave 15 million shares which represented 20% of his own equity back to the option pool and to a foundation to help underserved communities, and he's committed to giving an additional 40 million shares to the foundation..

He's going to give away ~75% of his ownership in the company he founded to employees and entrepreneurs in underserved communities. Whatever the price is on IPO day, this will surely amount to him giving away at least a billion dollars.

I can't fathom why people are so cynical, this is amazing.

Envy, greed, and or the general dislike of seeing other people succeed is almost always the explanation. That's why the same reaction happens over and over again, regardless of who it is that is getting rich. It's common believed that to get rich, you must take that wealth away from someone else (or otherwise do something dastardly); the limited pie of wealth fallacy.

Square is incredibly common these days at farmers markets and coffeeshops. This class of products has a lot of win going for it; I don't know if Square is going to own that market, but they have a huge advantage right now. I look forward to reading their financials.

edit: a roundup from the WSJ, Fortune, and other random news places suggests strong concern over the CEO situation. That seems fair. I would definitely discount the value of a non-profitable company with a part-time CEO. :-/

That said, having a "stupid simple and ubiquitous payment platform" should be a really easy way to print money. Why hasn't it? I think that story is the interesting one.

This is anecdotal, but I feel like I see Square's competitors just as much as Square at coffee shops and other small businesses these days. I wonder if there are some easy-to-find numbers for how many businesses use Square vs. Flint or others?

Furthermore Stripe is highly visible in places like the Bay Area, where I believe many HN members are located. I wonder what the numbers are for Stripe adoption outside of major tech hubs.

Stripe doesn't do POS systems. You're not likely to see a lot of Stripe POS systems in the Bay Area or elsewhere. Their prominence in the Bay Area is because they cater to developers who build stuff that uses credit cards.

Square primarily does POS systems. I don't believe the two companies really compete in any real way yet.

Square, in terms of market share, is relatively tiny.

First Data is practically 90% of payment terminals in the US.

Maybe the reason it hasn't is because farmers markets and coffeeshops don't represent significant cashflow. They are a good fit in those markets, but in that area they have a big piece of what amounts to a small pie.

That seems, based solely on how my gut feels, reasonable: they may have effectively saturated the untapped credit card swiper market in the US, which doesn't deal in high-cost items. I would, however, suggest that there's a whole credit card swiper market that exists that can be muscled in on that has much higher values - all grocery stores, for instance.

In any case, I should find the filing and read it. I came up with a similar and much worse idea about 6mo before Square came out, and I've been a total fan of Square ever since.

Jack Dorsey still owns close to 25% of Square, pretty incredible:


Fuck. Seriously. Fuck.

This could be the IPO that ends the party. One of the top candidates for first Unicorpse (see also Evernote).

Well, shit. I guess we better get back to building solidly profitable companies that can be started with the contents of our savings accounts, and don't require $600mm in VC funding!

Maybe we should all go IPO with our home made app.

This could be the IPO that ends the party.

What is your rationale?

Dropbox has gotta be in danger too

Look at those numbers! And for those to say that Square is innovative...their reader was basically all they had back in the day. Now that everyone has created a Square clone, payment processing is a race to the bottom and all about brokering deals with large merchants and hope that the banks and processing networks don't eat your lunch.

Throw in all the regulatory hassle of dealing with money and its transfer, as well as liability for fraud, and competing in an industry as exciting as refrigerators...

Refrigerators still see some innovation e.g. the recent "I put a door in your door..." trend:


I have to agree, even Intuit is in the game. Unless Square has a unique payment processing system that is some how oh so better than the rest of the processing world, there is nothing much here.

Actually, Intuit came up with the idea for using mobile phones to accept card payments in 2007 - long before Square.

They ran trials in the Bay Area in summer 2008, launched GoPayment properly in early 2009 (with a Bluetooth reader supporting various feature phones), and launched an iPhone app in August 2009.

Square announced their card reader in December 2009 and didn't actually launch until the following May.

Quick link to Square's full S-1 filing: https://www.sec.gov/Archives/edgar/data/1512673/000119312515...

So apparently Square and Box have both raised about the same amount of money, roughly $550-600MM [1][2], but somehow Jack Dorsey still holds 25% and Aaron Levie wound up with ~ 4% - Does anyone else find that surprising?



No. Jack was a co-founder of Twitter, so it was a completely different game for him. Levie was a nobody with an idea, and had to raise at almost egregious terms at times to stay alive.

Well square started after Twitter was successful right? So Jack probably had enough personal money to finance a lot of Square. Was Aaaron Levie rich before starting box? I'm on mobile so I don't know the ans Ed to that, but it sounds logical at the moment to me.

Box was also forced to print shares for Coatue and other late-stage investors who wanted a guaranteed liquidation preference in exchange for awarding the company with a unicorn label https://pando.com/2015/01/09/ipo-of-last-resort-box-has-no-c...

Their pace of losses are increasing at about 50% more per year. Most companies that file to go public are at least losing less money over time with a path to profitability. I don't see how this bodes well for a strong IPO.

because the future looks worse, and they want to make some money while they still can?

But you can also have to look at it as a percent of revenue. If their revenue growth is 100%, 200%, 500% then those losses are diminishing as a percentage of revenue.

I actually didn't look up what their revenue growth was, I am just saying that is the case. But either way, it doesn't paint a really rosy picture.

How many people have simultaneously been CEO of two separate public companies? The list has to be pretty small. No wonder Twitter waited so long to make Jack the official CEO.

Carlos Ghosn, CEO of Renault and Nissan, comes to mind.


It must mean he committed to stepping down there. Maybe he just agreed to see it through the IPO then walk away? As another user said here, how many people have been the CEO of two public companies at once? (Would actually really like to know.)

The Two-Company CEO, Exotic but Not Extinct

By Marc Hogan


Common misconception. Jobs was Pixar's main investor, but he never ran the company.

Does anybody else get the feeling that the primary goal of large scale venture capital these days is to pump-and-dump IPOs, regardless of the actual stability/validity of the underlying business?

Choosing between public stock with certain price at the end of any given day, and private stock with a dubious price that has not been "marked to market", LPs prefer the former. Who can blame them?

It is really disheartening that a company with such horrible numbers thinks they can go public. It's one thing to lose money before going public, and it's entirely another thing to lose money at increasing rates of speed and think you can find an audience for those shares.

Yow, from their filing: "Transaction and advance losses for the six months ended June 30, 2015, increased by $13.9 million. We incurred a charge of approximately $5.7 million related to a fraud loss from a single seller in March 2015."

I bet March 2015 was not a fun month at Square.

I like Square's product but the growing net losses concern me.

Isn't this good for startups in general?

Every time a startup IPOs the investors now have a chance to exit and re-invest in other startups with the fresh capital.

It's a little more complicated. This will likely mean a good return for the VC funds that invested early. But VC funds to my knowledge don't reinvest returns directly. Rather they raise another fund, often from the same LPs. And note that this usually happens multiple times before the return on the first fund is known.

So it will likely take some time for VCs to liquidate their position, return the capital to LPs, and then have the LPs reinvest in the same or other future VC funds.

All that said, a good return on a single investment will be seen positively by LPs and will make it easier for a VC to raise future funds, which is generally good for startups.

My only real point is that the money made directly from the Square IPO will likely not be deployed for quite awhile, and other events can turn momentum against startups in the meantime.

Trickle down economics has never really ever proved to provide value like that.

A smarter strategy would be to invest more conservatively after a risky yet big one paid off

doesn't the roadshow require an enormous amount of time for the CEO? Can you really do this and anything else?

Yes, it's morning to evening every second booked during the roadshow. You can get it done in a single (7 day) week if you really want to take that risk.

depends, you can do it in a few days if you want. Oliver Samwer famously did his in 5 days when Rocket Internet went public in Germany.

Would it make more sense for a larger company to buy Square before it goes public? I thought I'd heard people saying Apple or Google should but I'm not sure how much benefit there would be since they have payment systems now.

I don't think there would be any benefit. Square was revolutionary when they were the only one with mobile card reader technology. Now everyone has it. The only thing they have going for them is their _brand_. Apple historically hasn't bought anything that they can easily do on their own. Google much the same.

Counterpoint: Beats.

Apple doesn't need it: they have Apple pay, and probably aren't interested in making the Square dongle work for off-brand devices.

Google also has their own hardware & payment system. What does Square offer that Google doesn't already have, more or less?

> Google also has their own hardware & payment system. What does Square offer that Google doesn't already have, more or less?

Square's user base and momentum on the retail side. Even if there is nothing special in the technology, they might be worth buying for that.

How much is that user base and momentum worth? Billions?

The most likely acquirers would be Visa, Amex, Mastercard and PayPal (which bought Braintree). The transaction fees would significantly decrease because many transactions would stay inside the network. Plus, that would kill a challenger. Though I'm not sure it's better to buy them now or after they IPO. Maybe they're hoping for the market to lower the price.

Does anyone know, off hand, if Square has any important patents? I did a little searching, but couldn't find much.

I do like the company. Just curious if they have any patents that will prevent competition?

Patents are far from the only thing that prevents competition. Brand is arguably more important, and Square's brand is decent. I'd argue their biggest risk is that many merchants get frustrated with the swipe reader.

The money in credit card processing is in high interest loans fronted to the merchant that are paid back as a percent of the transaction. SquareUp for instance.

Jack, the Roger Bannister of his field.

What on earth did Lawrence Summers do for his +1M shares? HT Felix Salmon.

does this come actually faster than expected? will jack actually leave?

November 2016: Square files for Bankruptcy. Do the simple math, they lose money year after year in bigger amounts.

This will buy Square some time while it shops around for a buyer but that's assuming the capital market is still liquid and happy and there's no market downturn.


You talk about a super high PE and the fact that they have negative earnings in the same sentence. Do you know what these words mean?

If he doesn't, you haven't helped him at all. You've just derided him with no pointers to educate himself.

If he does, then maybe you could give the charitable interpretation of that he's joking.

If they are making a loss this implies they are not paying dividends. Therefore how can PE ratio be positive ?

I think he was joking.

Thanks guys. Irony..

same here

Don't beat me so hard. I know what they mean. So what? When you have P/E 250 I am pretty sure you have negative fundamentals, and you have some financial engineering in place to show "something".


So what does this have to do with Square's IPO?

Do you have an actual comment regarding the IPO or a point to make? What you have posted appears to be nothing but noise.

I don't know how he does it. http://imgur.com/QfNiUz3

Guidelines | FAQ | Lists | API | Security | Legal | Apply to YC | Contact