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WSJ Ignores 5 other Square co-founders (philipithomas.com)
79 points by philip1209 1606 days ago | hide | past | web | 40 comments | favorite

Let's get this straight: Square/Dorsey have an amazing PR machine. We hear about him like some kind of startup God due to it, not necessarily because he is so incredible.

To be clear, he's never had an exit and I don't see one for Twitter or Square anytime soon. There's hundreds of millions (billions?) of dollars of VC cash sitting in those investments without getting a return.

Meanwhile, Square announced in April it was trying to raise $250m at a $4B valuation (Source: http://techcrunch.com/2012/04/25/square-now-processing-5b-in...). They just finished that raise with $200m at a $3.25B valuation. That's a huge miss for such a big company. They're also burning cash at an enormous rate (see http://i.imgur.com/b1Sm9.png - leaked slide).

So just remember that he may be an amazing person, but the PR engine surrounding him so distorts everything that we hear that at least for me, I've stopped paying attention entirely.

PS: Don't even get me started on how much the press entirely screwed up the Starbucks partnership reporting. It's a tiny marketing ploy is all.

PPS: This is mostly just my opinion obviously. I prefer businesses to focus on creating a viable, long-term business instead of a clever marketing machine with an unsustainable revenue model.

This is going in the middlebrow dismissal corpus.

(I don't plan to mention that every time I find a new one, but this is the most perfect example I've found since I thought of trying to detect them algorithmically.)

If a 3.25b valuation at Square's age is a huge miss, all but a handful of companies in history have missed worse.

Do you actually know anything about Square's "PR machine," or are you just assuming he has one because he's in the press a lot? I don't know myself whether for example they have an in-house group that does aggressive outbound PR, or whether they have an outside PR firm, or both, or neither. It's possible the answer is neither; I get mentioned in the press a lot, and YC has neither.

Hi pg. Like I said, my evaluation is opinion and yours carries a lot more weight than mine, so I'd love any insight you have. Maybe I've got something wrong in my analysis.

Do you feel that Square's raise was successful even though it was a lower amount at a lower valuation than it anticipated? Maybe not a huge miss, but that seems like a miss to me. Thoughts?

(PS: I am using the term miss in terms of raise/valuation, not in terms of company success).

As for PR, having worked hard to get press both with PR and without, I feel like I have a sense of when it is being used and when it is not. In this case, Dorsey's coverage seems extraneous, flashy, and sometimes out of nowhere. Why are there so many articles about him and Square from so many publications seemingly all the time? Why all this hype around someone that, while immensely impressive, is still only one of a large number of people doing amazing things? Why do we not see so many articles on Elon Musk and Space-X from every magazine on the planet? I can't seem to go a day without seeing a profile of Dorsey or about Square. Feels to me like a very well calculated PR plan. Again, I may be wrong and would appreciate your thoughts.

Thanks and sorry for the entrance into the dismissal corpus. Promise to do my best to stay out of there in the future.

Some companies go public on the stock market and don't even raise 200m of cash. To raise 200m in VC capital alone is an enormous task. As for PR, people love public figures and leaders. They want to associate with the individual strife to the top! It makes for an incredible story about your product/service and this is what you want to do. You want to strike an emotion with your users!

Well, a few things about your analysis.

First, raising capital and going public are two entirely different things. One is generally an exit event and the other is not. One garners returns for your investors and the other does not. Square is raising operating capital to continue operations, not selling itself publicly to create returns for previous investors. I would be much, much more impressed to see Square go public than raise any amount of money. Or much more impressed with a company that raised $0 going public.

Big rounds aren't what matters when I say miss. What matters is that Square was not able to raise at the valuation it wanted and what that signals regarding their internal finances and the valley's investment community in general (and even beyond since Square raised from companies outside SV).

And yes, Square/Dorsey seem to strike a great emotional nerve, but that's my point. That's not by accident. That's very carefully crafted marketing. And to get as much coverage as they do, they probably spend an enormous amount on internal or external PR. It's all carefully crafted to tell exactly the story that Square wants us to hear.

Dorsey's PR has been mentioned in a number of articles. IIRC Vanity Fair was one, can't remember the other but the PR guy butt in during a coffeeshop interview. They are never more than a few feet away, and make sure articles mention that he wears Prada, dates models, and likes the expensive things in life. It's clear from miles away that Dorsey's image, and hence square is a highly managed affair.

So yes, we know a bit about Square and Dorsey's PR machine, it's been reported on in the press a number of times.

Thanks for the detailed clarification!

I hope your corpus includes all the metadata.

These will be a lot easier to detect by who is upvoting/downvoting rather than by looking at the text, of course. I mention this because the term "corpus" usually refers to a body of text, whereas the metadata here is the gold.

Attributing credit for the Square hardware is tough.

The WSJ article says Dorsey "engineered" the card reader. The blog post says no, it was Dorsey's friend, Jim McKelvey, who engineered the card reader.

However, the blog post does not say that McKelvey, in turn, seems to have outsourced the engineering to Robert Morley, a hardware designer and EE professor in St. Louis (http://venturebeat.com/2009/12/15/professor-claims-square-to...).

This last connection seems plausible to me. I went to school with McKelvey and knew him slightly. Morley was a very well-known EE professor at our university, and a hardware hacker who founded a successful company called Micro-Term that made terminals, and later worked on hearing aid hardware which I'm not sure ever came to market. Exactly the kind of person a former CS major and glassblower like McKelvey might ask to do the design.

The most recent summary I could find of the "who engineered the Square hardware" question is: http://techcrunch.com/2010/12/02/jack-dorseys-square-embroil...

I didn't say that Jim engineered the card reader - I said that Square credits Jim. I linked to this paper, but I do not think you explored further:


It is a filing by Square about the patent you mentioned that is held by Morley. Square is filing to have McKelvey added to the patent. Thus, Square as a corporation associates McKelvey with the device's invention, not Jack.

All of the points you make were implicit from that link.

PS - I'm a student at WashU, did you graduate from here?

These seem like distinctions that matter little, and yes, I saw the paper you refer to.

I posted here because I thought someone might have something new to add to this story -- the above info seems to be all circa 2010.

Yes, BSCS, BSEE. My roommate worked in Morley's lab.

It's amazing what people will dismiss as "unsustainable revenue models." A business that makes money from every single user, and does so in a way that scales exactly linearly with usage? "Unsustainable!"

You are correct. I mis-spoke. I should have said "profitability models" not revenue models.

Now, you seem to have interpreted that statement correctly anyways. So do you have any evidence whatsoever that Square "makes money" (ie. turns a profit) from "every single user"?

I would consider "using" Square to be making a transaction through Square. Square takes 2.75% of that transaction regardless of its size. So yes, Square makes money from every user.

His point is that he thinks that many people with the square card reader never read any cards. He's right - unless there's a government subsidy that I don't know about, Square does not make money from every user.

I appreciate the help, but that's not actually my point. My point is that Square does not keep the 2.75%. It is doled out as cost of goods sold in the form of interchange fees back to card networks and issuing banks. No one has any idea how little of that fee that Square keeps but I would guess around 0.2 - 0.5% at most.

And do you know the breakdown of that 2.75%? Most of it does not go to Square, it goes to card processing networks and issuing banks. Do you know what those are?

Also in your "leaked slide" where "they're burning cash at an enormous rate" one can clearly see that revenues exceeds costs. ie. making money?!

Do you have any idea how to read a chart? Do you see that "operating loss" light red colored area there? If the slide is to be believed, the aggregate cost of Square's transactional fees (the orange part) and their operating costs (the dark red part) is higher than their revenue (the blue part). That means they are operating at a loss of about $150k per day as of April of 2012. And it's accelerating. Feel free to correct me if I am wrong.

As for the source, the slide was on TC and the report is available with a subscription at https://intelligence.businessinsider.com/welcome. I can't verify it, but everything I have seen/know about their revenue model makes it look genuine.

After skimming the WSJ article, I have come to a conclusion. Dorsey is trying to be so hard to be Steve Jobs, except he forgot he has to make a profit.

This phenomenon is referred to as the Matthew Effect.

From Wikipedia:

In the sociology of science, "Matthew effect" was a term coined by Robert K. Merton to describe how, among other things, eminent scientists will often get more credit than a comparatively unknown researcher, even if their work is similar; it also means that credit will usually be given to researchers who are already famous. For example, a prize will almost always be awarded to the most senior researcher involved in a project, even if all the work was done by a graduate student.


That is a derivative of the "fundamental attribution error" (http://en.wikipedia.org/wiki/Fundamental_attribution_error) and essentially the entire point of the Republican party (just world fallacy - http://en.wikipedia.org/wiki/Just-world_hypothesis) - protecting the lucky/well known/founding/accrued notoriety people.

Former journalist here.

The news media tends to avoid complicated stories. Sometimes it's because the reporters and editors don't understand the story, but oftentimes it's because of A) space limitations or B) complicated backstories will confuse readers/audiences. Television news has an especially difficult time overcoming these factors.

But this is the WSJ. Complicated stories and cofounders/partners hitting rough patches (or being pushed aside) are the norm. In this instance, there's not enough data to determine what went wrong. But I find it hard to believe an experienced WSJ reporter would gloss over/leave out such important details.

Its worth pointing out that there is a vast difference between the following:

-Communicating something in a way that makes it easy to understand.

-Making an attribution error.

-Making numerous errors and omitting crucial, relevant, details.

I'm not sure about the WSJ, but many news organizations have moved toward "page view journalism" and the quality shows. I have a subscription to the WSJ but I'm not sure how much longer I will keep it.

Co-founders often agree that one guy should be the front man and get thrown under the PR bus, so the rest can focus on getting stuff done.

Doing an interview with a good photo pretty much kills a day. Multiply by an article a month, add fan mail and invitations to speak, and many sane people would prefer to stay in the background.

This blog imitates Svbtle's style way too closely. When visiting it, I believed he was part of the blog network. Imitation is flattery, but IMO this is a little too much flattery.

But possibly Svbtle isn't that original? https://github.com/gravityonmars/wp-svbtle (scroll to FAQ)

Looks like this is probably being used: https://github.com/NateW/obtvse

Media articles often get details wrong. While this can happen due to actual malice, more often the causes are sloppy reporting, rush to complete work on deadline, multiple edits by editors other than the original author, and similar reasons having to do with the journalistic process. While these causes don't excuse errors, they do explain the often incomplete picture media articles deliver.

I really think its going to be tough for Square once NFC really kicks in. Of course this won't happen until the iPhone includes it by default but it looks like they are getting there through passport. We will have to see what happens to Square at that point. They would be wise to cash out in the next year.

> This contains a major oversight – as reported by the Wall Street Journal, Visa is an investor in Square. It is not motivated to back the competition.

Sure it is. Microsoft invested in Apple while still competing with them.

That was because they didn't want to be broken up as a monopoly. VISA has no such worries.

The investment might have the purpose of getting an inside view into Square, and being able to adapt more easily should it take off.

With that reason, it makes sense for Visa to hedge their bets and invest in all parties of that market. With that they're in, no matter who wins.

Also gives them a discount if they want to acquire, or a payoff if a competitor wants to acquire.

> VISA has no such worries.

Would that they did. sigh

How is Visa a monopoly?

But it's not illegal to have a monopoly. It's illegal to monopolize.

I just don't understand why, as a CEO, it would ever be in your interest or the company's interest to appear in an article to be taking 100% of the credit. Wouldn't you want to do all you can to make sure your other team members get credit for their contributions? In my experience the answer is absolutely yes. No boost to your personal brand could be worth the possible backlash, resentment, and hit to morale within your team. After all, these are likely people that you'll be working with for years. I just don't get it.

What Dorsey isn't the golden boy that the valley and press make him out to be. blasphemy . Agree, VC's are just looking for a huge exit, with the payments platform and having someone be their Steve Jobs reincarnate will help.

Terrible title. Bitter submission.

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