As we think about some of the top entrepreneurs in recent history names like Steve Jobs, Bill Gates, Jeff Bezos, Larry Page, Elon Musk, and yes Jack Dorsey are frequently mentioned. You co-founded not one, but two public companies that have a combined market cap approaching $100B and somehow manage to still run them both today. So why should you listen to an anonymous TWTR account about how to further generate enterprise value for shareholders? You probably won’t / shouldn’t but below is an outline on how we think you can best position Square to be the largest financial service company in the world.

· Buy TWTR

· Roll up EM FinTech Digital Wallets / Neobanks

· Product Innovation

Square’s Humble Beginning

When you started Square in June of 2009, after Jim McKelvey was unable to accept a credit card for his art, we doubt even you had any idea just how big Square could be. Going back through your S1 from November of 2015, you wrote “A Note From Jack” telling investors this founding story, explaining the difficulties associated with setting up a merchant account, the manual intensive & operationally inefficient processes endured, and the hidden fees assessed. The stated goal was to enable anyone with a mobile device to accept card payments, anywhere, anytime.

Most people’s first introduction to Square was the mobile credit card reader that plugged into the audio jack of an iPhone. Few, if any, saw that and thought in 10 year’s time you’d have a market cap equivalent to that of Goldman Sachs, or over the next 15–20 years, this company could morph into the largest financial service company in the world competing with incumbents like JPM, Bank of America, Wells Fargo, Industrial & Commercial Bank of China, Credit Agricole, etc…

In the S1 you discuss building one of the “fairest and most efficient payments businesses in the world.” The S1 highlighted a number of macro trends you saw as tailwinds including:

· Local Businesses Driving the Economy

· Commerce is Increasingly Digital & Mobile

· The shift to authenticated payment technologies including EMV & contactless payments

· Small Business Need for Innovative Solutions

You highlighted Square’s end-to-end commerce system focused on access & ease of use, cohesion / integration, speed & predictability, and trust & transparency. The S1 highlighted a number of products including:

· In Person Payments

· Online Payments

· Square Cash

· Square Register

· Square Analytics

· Square Appointments

· Square App Marketplace

· Square Capital

· Square Payroll

· Square Customer Engagement

Today the most notable product of that bunch is Square Cash, which you launched in November of 2013 and it warranted 43 mentions in the S1, largely a footnote except for a brief description that described the functionality enabling users to “send and receive money electronically via email or a mobile app. Individuals and businesses can sign up for a Square Cash account using just a debit card and an email address or phone number. Square Cash started with peer-to-peer payments, which we offer to individuals for free. Square Cash can also help businesses eliminate paper checks and process more of their payments electronically by lowering the cost of payment processing through the use of debit cards. Since launch, people have sent over one billion dollars through Square Cash.”

Today the Cash App is the second largest P2P payment application & digital wallet in the U.S, with 30 million MAU in June, with more than 7 million users utilizing their Cash Card. Cash App delivered strong growth in 2Q20, generating $1.20 billion of revenue and $281 million of gross profit, which increased 361% and 167% year over year, respectively. Excluding bitcoin, Cash App revenue was $325 million, up 140% year over year; accounting for ~35% of total revenue; no longer just a footnote.

Cash App is Square’s foray into financial services and what started as a P2P payments platform, has expanded into Direct Deposit / Payroll functionality, instant cash deposits, debit card, ATM withdrawals, installment payments, BTC buy / sell, Cash Boost Reward & Equity Investing.

To see what Cash App / SQ can become requires looking East at some of the most valuable FinTech companies in the world. Leaving the UI / UX aside for a moment, the functionality between what Cash App offers today and the WeChat offering isn’t all that different. Roughly ~1/2 of WeChat’s homepage is dedicate to eCommerce, travel, gaming, gifting, etc… while the other half offers an array of financial services ranging from P2P transfers, to bill pay, to wealth management, and the ever critical chat functionality

According to Ark investment, the World Bank, and iResearch the volume of mobile payments in China has exploded more than 30-fold in just five years, from roughly $1 trillion, or less than 10% of GDP, in 2014 to an estimated $34 trillion, nearly three times the size of China’s GDP in 2019.

The transaction volume / daily attention that WeChat & Alipay captures has not gone unnoticed by your peer set & competitors, which is why we’ve seen companies like FB, AAPL, GOOGL, Samsung, and PYPL all vying to emulate the combined product offering.

Given the Big Tech antitrust concerns in the U.S. from both sides of the political aisle, any significant foray into financial services by FAANG+M will be met with staunch opposition. You were noticeably absent from a day of Congressional grilling when Sundar Pichai, Mark Zuckerberg, and Tim Cook had to testify at the end of July. This is a good thing. Despite concerns of some politicians about Twitters ability to amplify news, and involvement in elections, few are arguing you need to “Break up TWTR” in large part due to the relatively limited financial scale; your ~$3.5B of top line revenue last year equates to ~2.85 days for AAPL or ~18 days for FB.

You also happen to be the only current “Big Tech” CEO that also is the CEO of a Financial Service company where you are knocking the cover off the ball. Despite the fact that you IPO’ed nearly 5 years ago, the market continues to reward you for the growth story and product innovation with the stock +145% YTD. SQ currently trades at a ~$68B EV or 11.5x TTM / 8.0x NTM EV/S, and 245x TTM / 136x NTM EV/EBITDA; compared to payment network / acquirer peers at 25–30x EV/EBITDA & 35–45.0x P/E.

You and the balance of the Square leadership team continue to execute an deserve much credit for that; but it’d also be naïve to not acknowledge a macro environment where there’s a dearth of public “FinTech Co’s,” your inclusion in “cloud basket” ETF’s, and perceived benefits from COVID-19 (despite the headwinds for the legacy SMB business) as partially responsible for this stock price performance.

When the market is willing to defy any laws of gravity / historic or current valuation metrics for your company, and gives you the ability to think and act long term; you need to take advantage that. Phenomenal public market CEO’s like Jeff Bezos, John Malone / Greg Maffei, Bradley Jacobs, Barry Diller, Martin Franklin, etc… have all used a strong currency in some way shape or form to think big picture, and be aggressive and on the offensive ;whether internally with R&D, or to buy growth experiment via acquisitions. Now is the time for you to take advantage of the strength in SQ’s stock, emulate that playbook, and create the world’s largest global financial service company.

TWTR / Square Merger

We wrote a blog post last December entitled The Case for a Twitter / Square Merger. In it we highlighted that WeChat & AliPay are bigger than every country in the world not named China or India, each of which recently citing more than 1.2B MAU. It’s no surprise that Tencent (parent company of WeChat) is valued at ~$650B, while Ant Group (parent company of Alipay) is the world’s highest-valued FinTech company with a last round valuation of $150B.

SQ can follow in those footsteps and then some, given your initial toe hold in the U.S. and the fact that you can jump start this effort with the acquisition of TWTR and their 186M average mDAu’s. While there’s presumably some overlap between Cash App’s 30M MAU and Twitters 186M you’d be looking at a financial service wallet with 200M+ potential active users. This compares to ~52.5M JPM users, 37.5M Bank of America Users, 31.0M Wells Fargo Users, and ~19.0M Citibank users.

There’s been some pushback when a potential TWTR / SQ merger is brought up. From a strategic perspective a pro-forma Square / Twitter will have a vertically integrated payments processing system with unparalleled reach and intentional engagement. This will allow you to create one of, if not the largest closed loop payments network in the world. You could have a single app displaying a user’s TWTR feed, integrated with a Telegram / WhatsApp-esque direct and group messaging functionality, coupled with Square Cash’s payments functionality, as well as breadth of financial service offerings. In the creation of the closed loop payments network, SMB’s and large corporates alike could send / accept real-time payments through the use of a TWTR handle. This type of network could really make a dent on the ~2.3B Visa debit cards & ~1.3B MasterCard debit cards globally.

TWTR Underperformance: Out of all of the tech companies founded in the past 15–20 years, few have the usage, recognition, reach, and user profile that TWTR does without a corresponding monetization strategy. The beauty & the curse of TWTR is if you are good at TWTR, you don’t need to pay for TWTR. TWTR has built media empires in podcasting and journalism, authentically built company & individual brands, and has served as a megaphone for world leaders, athletes, businessmen & women, and everyone else in between; yet you haven’t been able to monetize that. There have been calls for a subscription service that’s add free, with “premium features” (and it looks like you’re hiring for that). But since the day of the SQ IPO FB is +213%, GOOGL is 183.5%, MSFT & NFLX are both +420% while TWTR is +9.2%. SQ is up 1,102.8% over a comparable time period.

We’re happy you didn’t listen to us in December because the deal has only become that much more attractive given SQ’s continued outperformance of TWTR. In December the ratio of TWTR / SQ oscillated between 0.45–0.5 vs. 0.25 last; or ~50% cheaper.

From a structural standpoint we think an all-stock transaction at a 25–35% premium would be enough to get the deal done (0.31–0.325 shares of SQ / TWTR); which would which result in 50%+ accretion to EPS. Deals that are that accretive financially, with the moonshot strategic rationale, given the relatively limited risk (and ability to spin the business off in 24–36 months if it doesn’t come to fruition) means you should act now.

Roll Up EM FinTech Digital Wallets / Neobanks

Once you digest the TWTR acquisition you have the ability to go global. If we look at TWTR’s mDAU ~36M are in the US vs.~150M mDAU that are ex-US. This should help dictate where you turn your attention first.

We wrote a piece on EM FinTech back in July highlighting the 1.7bn individuals that are unbanked and the hundreds of millions more that are underbanked around the world. Emerging Markets have the right mix of macro tailwinds from demographics, to technological innovation, to economic growth, and limited existing infrastructure that they are ripe for disruption from FinTech firms. We are seeing innovation across online / mobile banking, payments, wealth management, and alternative lending platforms which are brining financial services to unbanked & underserved populations, while offering a digitally native and often time superior solution vs. incumbent service providers.

If we look at FinTech companies according to CBInsights there are ~66 FinTech unicorns valued at $248B of which ~33 are based in North America; with the balance ex-US.

We’ve seen an uptick of deal activity across areas such as Africa, LatAm, and SE Asia over the past 5 years but they are still a fraction of US funding activity despite an equally large, if not larger market opportunity.

As we think about the existential “Build” vs. “Buy” conversation we think it’s important to maintain a local ethos / cultural appeal when entering new markets. We think there are a handful of strategic assets you could acquire in geographic regions such as Africa, India, LatAm, MENA and SE Asia and integrate them on a common Square infrastructure to cross-sell products & services where applicable, creating the largest closed loop payments network; while maintaining a familiar front-end for users. Many of these companies have millions and in some cases ten’s of millions of active users, but given their geographic location, a less robust VC ecosystem, and exit opportunities.


In November of 2019 you went on your infamous listening tour in Africa where you visited Nigeria, Ghana, South Africa & Ethiopia. Prior to your Twitter Board battle, and the COVID-19 pandemic you mentioned your intent to live on the continent for 3–6 months this year and tweeted:

Africa has the world’s fastest-growing population; a Brookings Institute study found that the world’s 10 fastest growing cities, between 2018 and 2035, will all be in Africa, and 21 of the 30 fastest growing cities will be there. The UN expects that over half of global population growth through 2050 will come through the continent. Nigeria alone is expected to add 189 million urban dwellers between 2018 & 2050. If all 55 African countries join a free trade area, it will be the world’s largest by number of countries, covering more than 1.2 billion people and a combined GDP of $2.5 trillion. As mobile / smartphone proliferation and Internet penetration continue to accelerate, financial services in many African markets are bypassing traditional banking infrastructure in favor of tech enabled solutions such as mobile payments, mobile banking and digital lending; a perfect opportunity for Square.

According to the World Bank there is ~$46B per year of remittance inflows to Sub-Saharan Africa in 2018. Remittance costs in African markets are higher than any other region in the world at ~9.4% per every $100, vs. 7.6% in East Asia, 6.7% in EU & Central Asia, and 5.9% in LatAM. These remittance corridors often originate in places such as the U.S. / U.K where Square has / can have a strong local footprint. The ability to create a cross-border closed loop digital wallet system would result in material savings for users / as well as P2P transactional volume opportunity for Cash App, and in turn revenue from FX fees.

Reuters recently published an article How Bitcoin met the real world in Africa, where they highlight monthly cryptocurrency transfers to & from Africa <$10,000 (which they qualify as “retail” / “small businesses” or the cash app sweet spot) was +55% YoY in June hitting $316M, with the number of transfers +50% surpassing 600,700.

When we look at companies in market we think you should acquire it’s a mixture of digital wallets that enable P2P payments, payment gateways, and other core financial market infrastructure including API enabled data layers.


In LatAm similar to Africa, ~60–70% of people remains unbanked, yet ~65% of the population uses a smartphone. Perhaps more impressively it’s predicted that by 2022 nearly 90% of all Internet connection in LatAm will be made via mobile devices.

The barriers to entry for banking are high in most countries where you need some combination of a proof of job, citizenship (sometimes with certain duration), and other paperwork. These accounts are riddled with hidden fees and often times discriminate explicitly against income levels.

The below data is from CGDEV, Trading Economics, Reuters, and The Global Economy; while slightly dated still is indicative of the general levels of banking / credit penetration in some of the largest countries in LatAM:

As you can see many of the financial inclusion issues you were looking to initially target with SMB’s in the U.S. are more prevalent outside the U.S. with individuals.

The remittance market to LatAm & the Caribbean in 2019 was ~$100B+ 8.2% YoY; with Central America & the Caribbean among the most income dependent regions on remittances.

Similar to Africa there’s been a robust BTC market across LatAm, not just for speculative purposes but for the ease & speed of sending money. We’ve also seen a stable coin market develop to help in “dollarization” of some of the more volatile currencies. Cash App / SQ could have a meaningful role in this market & similarly should look at Neobanks, and FinTech brokers to integrate into the Square ecosystem.

SE Asia

The Association of South-East Nations (“ASEAN”) as a single entity would represent the third largest market in the world after China & India, with the world’s third largest labor force (630mn people), and ½ of the population is under the age of 30. DB estimates that ASEAN is expected to become the world’s fourth largest economy by 2030 and highlights the fact that it has dramatically outpaced the rest of the world on GDP per capita growth since the late 1970s with average annual real gains in excess of 5%. ASEAN is the world’s third-largest recipient of foreign direct investment (FDI) with gross exports approaching ~$1.0 trillion. They have an estimated ~330 million internet users (or the Size of the entire US population). Despite all of this in SE Asia only 47% of individuals in the region have bank accounts, while less than 1/3 of local SMEs have access to credit.

Historically this region was one of the worlds’ most cash & paper-based economies, but they are quickly becoming one of the most advanced with instant payment systems being rolled out. ACI Worldwide recently published a report on the concerned effort of real-time payments in the region highlighting:

“Southeast Asian countries are making significant strides in payments modernization, with nearly every major country in the region having robust domestic real-time payments infrastructure in place. Despite the lack of uniform regulations and disparate economic priorities across the region, it’s clear that market forces — driven by the needs of businesses and consumers — will propel Southeast Asia towards the realization of a multi-country real-time network. The emerging ecosystem promises significant benefits and will greatly support growth and economic prosperity in the broader region.”

Remittance volume to South Asia, Central Asia, Southeast Asia, East Asia, and the Pacific is ~$300B / year which is just under ½ of the $682B. While they are arguably further along with RTP than we are in the U.S. again there would be real value in joining a common network for cross-border payments.

The region is also incredibly under-penetrated from financial service perspective with limited access to equity markets; particularly fractional U.S. equities.

Again there are a handful of P2P wallets, and new age FinTech brokers that would be of interest to you and the SQ team there.

Product Innovation

One of the things you and the Square team have done incredibly well is innovate on the product and successfully extend from payments, into financial services more broadly. In addition to growing via tuck-in M&A we think there’s significant room to evolve the core product offering to position Square as the preeminent financial service company. As the world is focused on “Embedded Finance” & the delivery of infrastructure such as Core Systems, Payments, KYC / AML, Account Aggregation, Checking / Savings Accounts, Payment Processing, Compliance, Lending, Wealth Management, etc… as a service Square is positioned to be that infrastructure layer as well.

· Autonomous Finance / Self-Driving Money- The holy grail of PFM is “autonomous finance” or “self-driving money.” Consumers should be able to answer basic financial goal & risk tolerance questions that will enable the automation of their personal finances. They should have a paycheck directly deposited into their Cash App bank account which will be a central hub for all other financial activity. From there, cash should be used to pay down high interest rate debt, with capital set asides for historical spending patterns, as well as recurring bills. Post that users should be able to pre-define different goals & objectives with money allocated into the highest yield savings account, short-term investment portfolio, and long term investment portfolio based upon those key objectives (in addition to the self-directed functionality you have today; you should add a managed / robo feature as well). While many companies have attempted to focus on the asset side of the personal balance sheet, tools for liability optimization are equally, if not more important. The Cash App should continually look for the lowest interest rate credit card, mortgage, personal and / or auto loan, etc… and notify their users; to opt in for the refinancing.

· “Alternative Alternative” Assets- We recently wrote a post entitled “The Finanicalization of Everything” where we expect to see marketplace constructs evolve for a long tail of what we call “Alternative Alternative” Assets; this includes everything from Art work to, Cars, to Collectibles, to Sports Memorabilia, etc… When I login to my Cash App I should see my SQ stock, next to my BTC, next to my Michael Jordan rookie card (and you can partner with a company like Rally Road to make that happen).

· Alternative Assets- As you continue to become a more critical component of user’s financial service stack, and they begin to trust Square with a larger percentage of their financial net-worth, you can look to expand to more traditional alternatives such as private company shares, real estate, limited partnership interest in funds, etc… held by RIA custodians such as Pershing, Schwab, or Fidelity.

· Industrial Loan Company (ILC) Bank Charter- As you know in March the FDIC conditionally approved SQ’s application for deposit insurance related to its ILC bank charter which they received approval from the Utah Department of Financial Institutions.

o Banking as a Service- Use this new designation to serve as a bank for select FinTech companies in the U.S that need access to existing banking rails.

· Lending as a Service- Many Vertical SaaS companies are looking for lending options either at the PoS or “on demand” for their clients; utilizing Square’s end-to-end solution + Square Capital Square can offer this lending as a service optionality to almost any software company.

· Payroll / Benefits- In the U.S. alone there are ~80mn people don’t have access to employer benefits including freelancers, contractors, gig workers, founders, and full-time employees with inadequate benefits plans. Per IRS Data there are 10mn Full Time 1099s, 20mn 1099’s / W2’s & 50mn W2’s who don’t receive benefits. Payroll & HR systems are some of the final closed business systems without API access s& standardization.

o You recently announced the ability to launch on-demand pay & instant payments which is a great innovation.

o Continue to iterate the product for SMB’s, solopreneurs, and freelancers. Allow for efficient tax withholding / submission.

· Parametric Insurance- Enable various insurance types through the Cash App starting with parametric insurance; which will be relevant particularly ex-US.

Bottom Line:

You have the fundamental building blocks in place to create the world’s largest financial service company; and unlike Twitter, your Square investors are providing you the currency you need to go on the offensive. Starting with a SQ/TWTR merger (which will simplify your life and enable you to focus on a single mission), coupled with a roll up of a handful of leading local players in areas such as Africa, India, LatAM, MENA, and SE Asia, and some slight product innovation; you will be able to create hundreds of billions of shareholder value.

But most importantly going back to your initial “Note from Jack” you will “create more inclusion and greater equality in the global economy, which is both a social need and a huge business opportunity.” You’ve made it your purpose: empower people with beautifully simple tools that give them an advantage where they previously and unfairly had none. Your strategy to realize that purpose is straightforward: grow your payments service, extend payments into financial services, and extend payments into marketing services.

What we’re suggesting is an extension of that by encouraging you to do so faster (given the market opportunity / timing), and on a global scale.

Ultimately when successful you’ll live up to the vision emphasized, “as a public company our decisions will continue to reflect what we’ve done as a private one — we put our customers first. That means constantly asking the question: how can the financial system better serve people? We’ll measure ourselves by our commitment to take the long view and focus on building a company that creates value over decades and not just a few fiscal quarters out.”



Interested in all things Venture, FinTech, Public Markets, Personal Finance, and Sports

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