Square develops rapidly but loses heavily

Absrtact: May 15--even in a fast-moving internet industry, the fate of the mobile-payment start-up Square is somewhat unprepared. Almost in a flash, the s of the social network Twitter co-founder Jackdorsey (Jack Dorsey)

Even in a fast-moving internet industry, the fate of the mobile-paying start-up Square is somewhat unprepared, May 15 news. Almost in a flash, square, led by Dorsey, the social-networking Twitter co-founder, Dorsey the industry's favourite loser. It is reported that Square is a fast-growing enterprise, but the loss is serious. The company is quick to burn money, shrinking its balance sheet and getting smaller options.

However, Miguel Helft, senior contributor to the Fortune website, contacted Magger Holford, a member of the board, who knew the company, and looked at the square's series of internal emails and found that the square story was far more complicated than other media described.

First of all, Square is a paying company that has built up a sizeable, fast-growing payment business. Now, Square is going to use it as a springboard into other, more lucrative areas. This week, Square launched two new products with such a plan, but the outlook is difficult. Shortly before, the company had just abandoned the three-year-old square wallet business. The business is also one of Square's main push businesses.

Square has not yet made a profit, but the main reason for its losses is a heavy investment in new products. In the past year alone, Square has added 300 employees and currently employs more than 900 people.

Some earlier reports suggested that square was losing money in every transfer transaction. However, the company's internal Mail showed that, excluding other costs, the gross margin of each transfer was maintained at a healthy level of 34%. For each 100 dollar transfer, the company received 3 dollars in revenue, while gross profit was 1 dollars. According to the company's internal mail, the amount processed by Square is $30 billion a year, with a gross profit of $300 million a year.

"The gross profit from the transfer has already been used to pay for the company's Sequoia costs," Rollov Boscha Roelof Botha, a partner of Sequoia Capital and a member of the square board. If we want to say, we can make a profit tomorrow, but the premise is ' we no longer invest in sustaining growth. ’”

However, Botha declined to disclose any financial figures. Allen Zamost, a spokesman for Square, also declined to comment on any of the company's specific financial information.

Inside Square, the company is expected to turn a profit after a year. The company's Mail also proposes another option, with a more aggressive investment, whose profitability may be pushed back a few months, but the company's profitability will increase. Square also admits that the company's cash reserves will fall from now to the profit-making period, but enough to support profitability. In the near future, Square has also locked a total of $225 million trillion in credit lines from several banks, a higher figure than previously reported, and it has also brought more breathing space to the company.

Sources familiar with Square say the company's forecasts are relatively conservative because they do not include the benefits of new products. They expect these new products to make the company profitable earlier.

Internal Mail showed that square lost 100 million dollars in 2013, but the loss was $67 million under a more general EBITDA standard. The loss does not count against Starbucks ' losses, but is 12 million dollars less than the company expects, narrower than the previous year.

Company director Botha declined to comment on future revenue forecasts, but said that Square's business was highly predictive, which meant that revenue growth was consistent with previous forecasts.

Recent reports from the Wall Street Journal have led to a spotlight on square executives. According to reports, Square's cash is about to run out and is looking to sell to more well-funded companies, Google (Weibo) is the most watched potential buyers. Then square angrily denied that it was talking to other companies about the sale.

The source said that Square did have contact with Google, but was talking about Google's venture capital ventures Google's potential investment plan for square. Currently, Google Ventures and Square declined to comment.

It is not clear whether Square has successfully raised 367 million dollars from investors. The company also had 155 million dollars in cash at the end of last year, according to company e-mails. Square executives were optimistic about the prospect of raising money from investors. The company recently allowed employees to sell a limited stake in the two-tier market, resulting in a shortfall of 40 million dollars in demand for supplies. Although additional capital can be raised by selling shares, Square does not choose to do so.

Another important question is whether square's market valuations will grow to $5 billion trillion. Fred Wilson, the top Silicon Valley founder of Union Square, recently spoke about "valuation traps" in his blog Flede Wilson. "Sky-high valuations, high rates of burning, combined with disappointing IPO markets are not all that comfortable," Wilson wrote. Wilson also said that both square and box could face a situation in which he hoped the two companies would bypass the valuation trap but have to make tough choices.

Botha, director of the square company, is not worried about that. Botha said he had seen many companies whose valuations exceeded business expectations and suffered huge losses on financing as a result of the decline in valuations, but there was no problem with square.

With no planned listings this year, the current cooling of the IPO market and the recent fall of tech stocks are not square's focus. They may now be more concerned about whether the company's core business will grow on its established track. If external competition, slowing growth, and consumer and business spending habits stop growth in their core business, the wishful thinking of Square's earnings next year may be hard to achieve.