Square, the San Francisco-based mobile payment company, has attracted $25m in investment from US-based coffee retailer Starbucks in a deal that will also see Starbucks adopt Square’s payment technology across its near 7,000 US stores.
The $25m investment will be part of a larger Series D round. It was reported last week that Square was close to finalising a $200m deal led by private equity investor Suhail Rizvi that would also be part of the financing round. The deal with Rizvi would see the company valued at $3.25bn.
Square’s current venture funding total stands at $166m. The company, created by Twitter co-founder and chairman Jack Dorsey, secured a $100m investment during a Series C round last year led by venture firm Kleiner Perkins Caufield & Byers with participation from Chase Coleman’s hedge fund Tiger Technology Global Management. The Series C round went on to attract attention from Virgin boss Richard Branson, who invested a further $3m.
Square also raised a $27.5m Series B round in January 2011 which was led by Sequoia Capital and backed by Visa. A previous Series A round in 2009 led by Khosla Ventures with participation from numerous individual investors netted $10m.
The Starbucks deal marks a crucial step on the road to success for Square in a hotly-contested mobile payments market. Despite being well received by critics, Square has yet to catch on with the general public. However, the exposure gained from Starbucks may help the company break into the mainstream.
“As the largest retail mobile payment platform in the US, we are excited and proud to accept payments with Square,” said Starbucks chairman, president and chief executive Howard Schultz in a statement.
Schultz, who will be joining Square’s board of directors as part of the deal, added: “The evolving social and digital media platforms and highly innovative and relevant payment capabilities are causing seismic changes in consumer behavior and creating equally disruptive opportunities for business. Both Starbucks and Square take a similar approach when building products and running our businesses, and together we can bring the best possible payment experience to Starbucks customers.”
Jack Dorsey, Square chief executive, said, “We are proud that Starbucks chose Square, as we share the value of always putting customers first. More than 2 million individuals and businesses can already use Square. This partnership will accelerate our ability to provide them with the tools they need to grow their business and thrive in today’s economy.”
Aside from Square’s credit card reader tool and app for smartphones and tablets, Starbucks will be making use of the Pay with Square app. Once fully integrated, a customer’s phone will notify the store that the customer has entered using GPS. This will trigger a name and photo to pop up on the cashier’s till. All a customer then needs to do is to place their order and have the cashier match their face to the one on the till, and the payment is complete.