The mobile payments start-up Square Inc. has raised $27.5 million in venture capital, a spokeswoman confirmed Tuesday.

The San Francisco company, which is headed by Twitter Inc. co-founder Jack Dorsey, raised the funding from the VC firm Sequoia Capital as well as its earlier investor Khosla Ventures.

Khosla in November 2009 invested $10 million in Square, which sells a square-shaped payment card reader that can plug into Apple Inc.'s iPhone, iPod touch, iPad and devices running on Google Inc.'s Android mobile operating system.

With the new round of funding, Sequoia Capital partner Roelof Botha is joining Square's board of directors, which also includes Dorsey, Square co-founder Jim McKelvey and Khosla partner Gideon Yu. Botha is a former chief financial officer of eBay Inc.'s payments unit PayPal Inc.

After a rocky start that saw delays in the commercial release of its service and criticism from some customers over transaction limits, Square has gained traction among small merchants and larger retailers.

"I think the biggest surprise for us was how people were using it as a point of sale replacement," Dorsey said in an interview last month.

He said some merchants are also using Square's service for the acceptance of cash payments versus card payments.

"It doesn't just speak to the fact that they want to process cards," Dorsey said. "They want to process payments and they want to do so in a way that is fast … and gives them data about how they're doing during the day."

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