Jack Dorsey And Other Square Insiders Respond To All The Haters

Square just posted the "Top 10 Myths About Square." Jack Dorsey and his superstar investors respond to the six they really care about.

Lately, Square CEO Jack Dorsey has been binge watching Friday Night Lights. The uplifting TV series, about a high school football team called the Dillon Panthers, is centrally themed around underdog comebacks. And after the week Dorsey has just endured—during which Amazon launched a product aimed at stealing away Square’s customers, a move that compelled the startup to publish a blog post debunking the "10 myths" about Square, including whether its business is struggling—one might think Dorsey is due for a Panthers-style comeback of his own.

Based on the time I spent with Square, including interviews with Dorsey, his investors, and his key lieutenants, here are their flesh-and-blood responses to the myths they really care about:

Square's business is struggling
Dorsey and his team carried a defiant if not buttoned-up demeanor, appearing almost bored by the media’s negative attention and "misinformation," as they put it, offended at any suggestion that Square's vision and mission has evolved or changed. "There’s always confidence, because we know our numbers," says Dorsey, who doesn’t buy into the cliché narrative of a startup’s hype cycle. "There's a buildup phase, then a takedown phase. Facebook, Google, and Apple all got it; Twitter is getting it, and Square is going to get it, too. We’ll get through this phase, and then we’ll be born again. Who cares?"

Square's $225 million line of credit is a "cushion" against the company's losses
"That credit line was old," says a source with knowledge of the company's financials. "That money was always there, and it was always being used for various parts of the business, specifically to ensure that Square could do next-day settlements with merchants. The revolver was initially around $25 million, but once Square hit 50% of that number, the revolver raised to $100 million, then to $200 million. Do the math: If you take marketing out of the picture, the company would’ve been profitable nine months or a year ago."

Square's going to be acquired
"I feel like someone has an ax to grind or that the story was planted by a competitor," says Sequoia Capital’s Roelof Botha, a Square investor, regarding the reports earlier this year that Apple or Google were interested in acquiring Square.

Explaining rumors of an acquisition, Botha contends that because Square is such an "interesting company, it inevitably makes it on the agendas of big tech companies," a sentiment the company has expressed before. Perhaps Square was an agenda item at a Google off-site, he surmises. "That doesn’t mean we talked to them or approached them. Just because John is interested in Suzy, doesn’t mean Suzy is interested in John."

Dorsey says that he has no interest in working for a larger company. "Our independence is a massive asset: It allows us to be device agnostic, whether a merchant wants to run Android or iOS, or a buyer wants to order from a Windows Phone," he says. "That independence gives us freedom, and that’s important to me." But wouldn’t the larger resources of a tech giant like Google help in its quest? "No, not really. It would make us lazy. Constraint is important."

Square’s product roadmap is muddled
Based on my reporting with Square insiders and merchants, I came to the conclusion that Square has adopted a see-what-sticks approach as it seeks new sources of revenue, an approach which isn't entirely coherent. Dorsey again rejects this notion. "We didn’t just think, ‘Hey! Let’s build this thing!’ And then a month later launch it," he explains. "These things have been in pilot for months or years."

Dorsey and company do acknowledge they've made mistakes along the way. Wallet, its recently killed digital wallet app, is an example of a product Square believed in internally and continued to invest resources into, despite its lack of success in the market. "As companies grow, you start protecting things you love," Dorsey says. "When we get comfortable with what we have, then we start protecting it and then we won’t evolve, and if we don’t evolve, the world evolves around us, and then we become irrelevant."

The company seems to have realized it must be more open to experimentation in its search for higher-margin, non-payments revenue. "If you ask me, was Square [Capital] on the agenda four years ago? No. But that's learning," investor Vinod Khosla told me. "A year and a half ago, would I have said Order was a big business? No."

The fact is, Square is still figuring out what it wants to be when it grows up, and Dorsey tells me he’s looking for new talent to help the company in this journey. "I say to [new hires], ‘Look, you have fresh eyes,’" Dorsey relates. "They can say with confidence [about Square], ‘Hey! There’s a hole in the ground, and you keep walking around this hole—why?’"

Square’s detractors in the media have a point
"Good companies follow their vision and iterate on their tactics; they don’t only focus on the press," Khosla says. "Reporters would like to think otherwise, and frankly, I’ve had to ask many CEOs why they’d let some writer, who has never run a business, dictate their strategy, especially in technology. Most writers are English majors. It’s mind-blowing."

How has the negativity has affected Dorsey himself? Much of the negative press over the last year has been squarely heaped on the shoulders of his outsize personality. When I raised the issue with Dorsey, he begins to answer before stopping short and letting out a sigh. "It’s unfortunate because I think the press has just become so negative recently, and the role of journalism is to hold people accountable, but it feels like it has gotten more personal than accountable," he says, sounding hurt but not dispirited. "And I don’t like that."

Dorsey wishes the media would instead push back more on ideas than the industry's personalities. "It just feels like it has just shifted to really, really personal stuff," he repeats. "It just feels like a waste of time. No matter what, though, it makes us stronger. You either continue to fight or you go away. Maybe that’s why it’s so personal, maybe that’s the bar: It just makes people stronger so they don’t go away, or maybe people are hoping that they do go away—I’m not sure what it is."

Square is a Jack Dorsey vanity project
Colleagues say Dorsey can take a punch, and that he doesn’t care about the blows to his ego. "Jack's mission is to make Square successful," Botha explains. "His mission is not, 'How do I build an edifice to Jack Dorsey?'"

When I asked Dorsey directly about what he wants to leave behind with Square, he says his goal is to make something that resonates with everyone on the planet. "Justin Bieber can do it," he says, smiling. "He can have everyone around him tapping their feet. Even if they don’t like Justin Bieber."

[Photo by Dan Monick]

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9 Comments

  • It's sad that when you reach a certain level, legacy status is the next cliff to climb, and the margins contain a lot of people who have been there, tried, and failed to leave something worthy of our recognition in the long term. Maybe he was kidding, but I don't consider Justin B. a person who has broached legacy status. The founders of Google, yes. And let's not forget, get your priorities in check people. Putting out something we need, and working with what shows results is the important thing. Not 100 percent clamoring to ego or to future speculative markets.

  • dj

    It is not a myth that Square is struggling due to rising competition. Merchants now understand that A. They can save money with their competition B. They can get better service C. There are much better alternatives.

    I use MagicPay Merchant Services ( http://www.MagicPay.net ) which is a fairly small company for processing. They have excellent products to offer mobile and online merchants. I also recommend you trying Merchant Solutions ( http://www.credit-card-processing.info ) They advertise great rates as well and they work with First Data and Global Payments.

  • Please, please invest more money. I know if I try enough different things, some fancy idea is going to work. Believe in me, and you will be born again! I beg of you, invest more money in my financial schemes!

  • li8ras

    And the ad/clicks keep coming...far far away from the reality of the situation. Clueless.