This 4-year-old company just got valued at $5bn – why?

Do you think it’s over-valued?

It was launched in 2009, and that year was valued at $45m. By June 2011 it had been valued at $1.6bn – then it more than doubled that valuation to $3.25bn in September 2012.

Today, payment-processing technology company Square has been valued at a whopping $5bn. That’s almost as much as the entire GDP of Bermuda, and more than Google paid for Nest yesterday in its second-biggest acquisition ever, at $3.2bn.

How has this four-year-old start-up – which lets you read bank cards with your smartphone –   racked up such a colossal valuation?

For starters, its co-founder is one Jack Dorsey.

Dorsey is none other than the co-founder of Twitter.

The others two founders are engineers Jim McKelvey and Tristan O’Tierney, although the latter has now left the company.

The mobile payments company is also processing a staggering amount of money.

It processed a total of $20bn in 2013, and is forecast to process $30bn this year.

And that amount has grown at an astonishing rate over the past couple of years.

In mid-2011 Square was processing $4m a day, which works out at $1.46bn a year (although it was processing less at the start of 2011 and significantly more by the end, so that figure does not represent its actual run-rate in 2011).

By November 2012, Square was processing payments at a rate of $10bn a year.

The figures above also exclude those payments processed by one of its most notable investors…

Starbucks Corporation invested $25m in 2012 and uses Square in its stores.

Overall, Square has received whopping amounts of investment.

It has raised $341m in total, according to CrunchBase.

And as if all that wasn’t enough to prove it’s growth, Square’s team is exploding in size too.

The company has grown from 400 staff at the start of 2013 to around 700 today.

What else? Why is there so much interest and investment in Square?

Mobile payments are the future, as we explained in these features:

The future of money: the five forces killing off cash

7 payment technologies that could spell the end of cash – and change the way you do business

 

So do you think Square has been over-valued, or that it’s worth $5bn?

Let me know in comments below or on Twitter @sophiehobson and @londonlovesbiz

 

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