SAN FRANCISCO, CA - Square, the mobile payments company led by Twitter co-founder Jack Dorsey, is hoping to grow in new directions by acquiring Caviar, a Bay Area startup that delivers meals from restaurants that don’t have their own couriers.
Both companies announced the acquisition Monday. Square has been adding various new services for restaurants and retailers, including inventory tracking and ordering software, as it attempts to expand beyond its primary business of processing credit card payments.
“It’s logical for them to be looking for where they can extend into adjacent businesses,” said Todd Ablowitz, president of Double Diamond Group, a consulting firm that focuses on the mobile payments industry.
By some accounts, Square has been struggling for profitability — and to meet the high investor expectations that have come with Dorsey’s lofty profile and glowing media accounts. Square lost roughly $100 million last year, on revenue of $550 million, according to a report by The Wall Street Journal, which cited unnamed sources who also said Square had delayed plans for an initial public stock offering.
Earlier this year, the 4-year-old Square had itself approached other large tech companies, including Google, to discuss being acquired, the Journal reported. Square denied the report.
Square is best known for its simple-to-use, square-shaped device for reading credit and debit cards. Businesses pay a small fee to Square for each transaction on the device, which plugs into the audio jack of a smartphone or tablet. It’s especially popular with artisans, independent merchants and even food-truck operators.
Dorsey has also experimented with other forms of electronic payments and recently introduced a mobile app, Square Order, which lets users use their smartphone to place take-out orders for food or goods that they pick up.
In a blog post, Caviar said it will continue to operate separately from Square “for the time being.” The service works with restaurants in San Francisco and several other U.S. cities, charging diners a fee of $5 to $10 to have Caviar’s contract drivers deliver meals quickly.
Terms of the acquisition were not disclosed, although The New York Times reported its sources said Square will pay about $90 million in stock.
In a statement, Square said, “With the acquisition, Square deepens its commitment to providing independent sellers with services that make it easier for them to grow their business.”