Square Raises $27.5M From Sequoia And Khosla, On Track To Process $40M In Q1 Payments

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We recently reported that Jack Dorsey’s mobile payments startup Square was in the process of raising a new round of funding at a $200 million valuation. Today, Square’s general manager Keith Rabois tells us that the company has officially closed its largest round of funding to date, raising $27.5 million in new funding led by Sequoia Capital with exiting investor Khosla Ventures participating in the round. Sequoia partner Roelof Botha has joined Square’s board of directors. We’ve heard from sources familiar with the matter that Square’s valuation in the round was around $240 million (that’s up from a $45 million valuation in the startup’s Series A round in 2009)

Square has steadily gained traction as a simple payments option for small businesses and is processing millions of dollars a week in transactions.

By way of history, The brainchild of Dorsey and Jim McKelvey, Square was unveiled last December as a small credit card reader that could turn any iPhone into a mobile cash register. The startup unveiled apps for the iPad, Android and iPhone.

Square initially launched as a private pilot limited to only 50,000 users and launched to the public last Fall. Dorsey also brought on PayPal and Slide veteran Rabois as General Manager in August.

Botha’s addition as a board member makes sense considering his experience as CFO of payments giant PayPal. Rabois says that the new funding will be used to go on a hiring spree for the company particularly for engineers and designers. The investment will also be used for sales and marketing purposes. He predicts that Square will process over $40 million in payments in the first quarter of 2010.

“It’s about empowering people to grow their businesses,” Rabois explains. “And you are going to see more and more instances of larger businesses accepting Square as they want to bring the Apple-store like experience to consumers.”

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