VeriFone CEO on Square's Latest Funding Round? 'Pets.com'

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Square is close to raising $200 million, according to reports, for an implied valuation of $3.25 billion — nearly as much as its well-entrenched point of sale competitor VeriFone, which is currently worth about $3.7 billion.

Square has been battling competitors for the past several years and has successfully created a business out of providing card acceptance for casual users.

When asked about the news and speculation that Square could rival VeriFone's size with only about a tenth of the sales, and no real profits, VeriFone chief executive Doug Bergeron responded with two words: "Pets.com" — referring to the over-hyped dot-com that crashed and burned in 2000. (A Square spokesman declined to comment.)

Other industry observers are more open-minded. "It's very impressive that they are raising money at this kind of valuation," says Wedbush analyst Gil B. Luria. "That they are raising money at this kind of valuation, that they are now [almost] as valuable as VeriFone… It's a testament to the fact that Square has not only been a tech innovator, but a business innovator. They are the ones that uncovered that there is a lot of untapped demand."

The New York Times' DealBook broke the news. The financing round will be led Rizvi Traverse Management head Suhail Rizvi, according to DealBook.

But while the investment could help Square better compete with the likes of Google, Intuit, PayPal, and, of course, San Jose terminal maker VeriFone — all of which have launched mobile payment dongles of their own — Square could actually pose a greater threat to the card associations.

"Granted, the direction they're espousing may end up being more disruptive to MasterCard and Visa in the future," says Ron Shevlin, a senior analyst at Aite Group, in an email. "But given the future potential for mobile payments (both from a retail and P2P perspective), I can easily see why an investor would want to put $200 million in Square."

Indeed, bankers never saw Square coming and in the past underestimated the now three-year-old company, says James Van Dyke, the president and founder of Javelin Strategy and Research.

"At NACHA Payments a couple of years ago, many veterans were dismissing the threat represented by this money-movement interloper, yet Jack [Dorsey] and Jim [McKelvey] realize that payments is all about networking technology and social interaction," he says. "What I'm watching for are signs that Square could plan to strengthen their role in enabling merchant acceptance and then use that as a springboard for payments issuance, to compete with the likes of other Silicon Valley companies."

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Comments (1)
Maybe Verifone is the new Research In Motion. A little
Posted by rgoffice | Thursday, July 26 2012 at 5:15PM ET
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