By Sarah McBride and Gerry Shih
SAN FRANCISCO, July 24 Mobile payments company
Square is close to securing around $200 million in new funding
from private-equity investor Suhail Rizvi at a valuation of
about $3.25 billion, a source familiar with the matter told
Reuters, less than the company had hoped for.
Square, headed by Twitter co-founder and chairman Jack
Dorsey, has secured previous financing from prominent venture
capitalists and some said it had been seeking new funding at a
$4 billion valuation.
Facebook's messy initial public offering -- it remains well
below its $38 IPO price -- may be taking a toll on valuations of
some companies around Silicon Valley, investors say.
Rizvi runs Rizvi Traverse Management, which has made
investments in companies ranging from Summit Entertainment to
microblogging service Twitter-- whose chairman, Jack Dorsey, is
Square's chief executive officer.
The news of the funding was first reported by the New York
A Square spokesman declined to comment, as did a spokesman
While Facebook shares have recovered somewhat from the
depths of their post-IPO dip, its shares are currently trading
around $28.45, a big discount to the $38 they commanded when the
company came to market in May.
Several companies raised money at steep valuations just
before the Facebook IPO, which many investors expected would end
with Facebook shares trading well above their IPO price. Perhaps
the most prominent was online bulletin-board service Pinterest,
which raised $100 million at a $1.5 billion valuation.
But others, including Square, were still talking to
investors. Square aims to reinvent the payment function with
mobile devices and sophisticated software and identity
The company announced a $100 million investment led by
Kleiner Perkins Caufield & Byers last June, valuing the company
at $1 billion. Other backers include Sequoia Capital, Tiger
Global Management, and Visa.
Venture capitalists generally try to invest in companies
they think will be worth at least three to five times more than
their initial investment by the time the companies are sold on
or go public.
That means Square, to justify a $3.25 billion valuation,
would have to be worth at least $9.75 billion in a few years - a
tall order for a company operating in a business with slim
margins, deep-pocketed and established players, and extensive
Square's fans counter that it is growing quickly and has a
unique opportunity to leverage social media platforms and upend
entrenched businesses that are short on innovation.