Square, Now Worth $1 Billion, Wants to Take On Google

Twitter co-founder Jack Dorsey's new startup just raised $100 million

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Square is getting serious. The year-old mobile payments startup founded by Jack Dorsey just secured $100 million in fresh funding, a big number that boosts Square's valuation up to $1 billion, a bigger number. This, just a few days after news that Foursquare is now worth over half a billion dollars according to the company's investors. The two-year-old company's founders, Dennis Crowley and Naveen Selvandurai, announced in a blog post Friday afternoon that they had secured $50 million at a $600 million valuation. TechCrunch called it "one of the most secretive rounds of venture capital [they've] ever seen."

With the flood of new capital, Square and Foursquare are poised to join Zynga in the mobile-first vanguard. Investors can't seem to get enough of these companies that primarily live on mobile devices. Square and Foursquare--what similar names!--seem especially viable as they seem to be beating major competition from tech giants with competing services like Google, who recently launched Google Wallet to compete with Square, and Facebook, who last year launched Facebook Places to compete with Foursquare's check-in and location-based deal business. Big companies want to know how they're doing it. Dylan Byers puts this into perspective, quoting Eric Schmidt talking about Google Wallet at this year's Cannes Lion festival. Schmidt's vision sounds like it involves a little bit of Square and a little Foursquare too:

What does Schmidt’s future look like? “So I'm in Cannes and I want to buy a T-shirt,” he said. “My phone should be saying, ‘You can turn left here and go get 30 percent off your favorite brand.’ Then I go to the store and pay for it on my handset.”

In other words, your phone will know what you want and it will allow you to pay for it without a credit card. “The best thing would be if Google knew what you wanted without you having to type it in,” Schmidt said. “With your permission, with a mobile phone we can trigger search queries about where you are.”

But it gets better: In roughly a year, according to Schmidt, a third of all checkout stands in restaurants and retail stores will allow you to “tap and pay” with your mobile phone. “How big a market is that? We're talking trillions of dollars,” he said.

It's easy to launch into the bubble theory at this point. Foursquare more than tripled in value over the course of nine months--that's impressive. With various stock markets jousting over IPOs, the furor for social media companies is red hot. Despite widespread warnings of a looming social media bubble, LinkedIn roared out of the gates in its initial offering in May; shares spiked at three times the set IPO price, which had already doubled in the week before. Groupon and Facebook are both expected to IPO within the next year and stock exchanges are literally warring over who will get to list the companies.

"All right, Fourquare Inc., you’ve got the big user numbers (10 million), the big funding round ($50 million), the big valuation ($600 million post-money) and even the big Times Square billboard," wrote Ty McMahan at WSJ's Venture Capital Dispatch. "Now, let's see some revenue."

That's a fair demand. But it looks like Foursquare might just wait and see, as Square and others build out the mobile payment markets. Jumping back to Eric Schmidt's vision of the future, forward-thinking tech companies dying to be the first to integrate location-based deals, personalized recommendations and seamless payment, all from a mobile phone. Foursquare can already do those first two things, and Square is establishing itself as the leader in the third. Within the year, Square expects to be process a billion dollars in mobile payments, and Foursquare will expand internationally. Dorsey also announced last month that Square, like Foursquare, wanted to work with merchants to offer special deals.

The business plans of Square and Foursquare seem to be converging in this magical place that big tech companies like Google want desperately to own. According to the latest investment numbers, the two companies are big, but independently, they're not Google big. Now, about those similar names…

This article is from the archive of our partner The Wire.