Square, the producer of a tiny credit card reader, may soon get a massive cash infusion.
The mobile payments startup is reportedly set to raise $200 million, which would give the company an implied valuation of $3.25 billion, Dealbook’s Evelyn Russli reported Tuesday, citing sources briefed on the deal. The financing is expected to come from Rizvi Traverse Management, a small private equity firm, sources told the reporter.
“The hefty investment — the company’s third in less than two years — will help the fledgling startup battle with the likes of Google, Intuit and PayPal. But it also puts enormous pressure on Square, led by Jack Dorsey, the co-founder and executive chairman of Twitter, to prove its worth,” Russli said.
PayPal, for its part, recently launched its PayPal Here system, which, NYT’s David Pogue noted, is nearly identical to Square’s card reader. Both devices snap into smartphone ear jacks, and can be used by individuals and small vendors to accept credit card payments on their phones.
Both Square and PayPal offer users their hardware and app for free, and charge vendors a swipe fee that’s typically less than regular credit card processing fees. Some believe those fees will only continue to drop as competition grows.
As tech giants pile into cardless payments, Square’s valuation, which has jumped more than 13-fold in less than two years, indicates that some investors believe the fast-moving startup can beat out services offered by behemoths like PayPal and Google.
Square’s latest innovation, recently reviewed by Pogue, is called “Pay with Square.” The new service, which more than 75,000 vendors have signed up for, allows users to pay for items simply by saying their name to the vendor.