By orchestrating a series of remarkably strategic and atypical moves, Square quickly rose through the ranks and established itself as one of the most popular small business payment processors. Additionally, it managed to do so despite being on the market for a relatively short period of time.
From the moment they entered the scene in 2009, Square devices clearly displayed a potential to completely disrupt the credit card payments industry. Right from the get-go, the company made it clear that their intention was to make credit card processing more accessible to small businesses everywhere.
As you’re about to see, their climb to the top has been swift, effective and profoundly strategic. Yet, even though some impressive tactical moves were made, Square actually managed to make it big by doing a (fairly) simple thing—solving a real, widespread problem while also making sure that people got more than they asked for.
The remainder of this text will examine precisely how Square gained traction, and outline everything up-and-coming entrepreneurs can learn from this company’s incredible growth.
Image source: Wikimedia Commons
How the Stage Was Set for Square to Disrupt the Market
Before Square caused a disruption with its revolutionary service, card payments were an expensive and difficult process for retailers. Owners of small venues had to set minimum purchase limits and their commissions were too low, so a fairly limited few had the luxury of accepting credit card payments. Unfortunately, most people were carrying plastic instead of cash by that point, so small businesses were losing out on a lot of revenue.
As with most fast-growth products, such as Slack, Square started out by identifying and addressing a far-reaching need with an effective solution. However, their aspirations were not a result of a deep market analysis or anything of that nature. Jim McKelvey, the founder of Square, learned about the restrictions of credit card payments while participating at an art fair, of all places.
McKelvey wanted to sell a piece of glass, but ran into a problem when someone requested to pay for it with a credit card. The inability to receive a payment that way cost Jim about $2,000, which spurred him into thinking about possible solutions that could have helped him receive credit cards on the spot. He came up with a concept of a small device that would be able to receive credit card payments through an app, once it was attached to a mobile phone device.
And so, the idea behind Square was born.
It didn’t take long for McKelvey to develop a checklist of what his device for receiving credit cards needed to cover in order to make it in the current market climate. It had to be cheap to maintain, practical to use, user-friendly and reliable.
After coming up with the idea, McKelvey wasted no time—he decided to quickly start reaching out to potential investors before someone else formulated a similar concept.
Fortunately for McKelvey, he was able to pair up with a dream partner. Jack Dorsey, the co-founder of Twitter, promptly accepted to join the ambitious quest for making credit card payments affordable and practical.
140 Reasons Why Square Will Fail
Many often argue that Square’s turning point had everything to do with Jack Dorsey’s celebrity status and the fact that he got onboard as soon as he did. However, while Jack’s reputation did play a major role in the company’s earliest stages, Square’s powerful and sustainable growth engine had a lot more to do with an incredible strategy the two co-founders devised.
The first thing Dorsey and McKelvey did was write “140 Reasons Why Square Will Fail,” a now notorious text that was sent out to potential investors and clients. This text presented a total of 140 problems the two founders identified as issues many would point out as a problem of the Square implementation. However, what the title held secret was that they also prepared counterpoints for every single issue on the list.
Armed with both all the questions and the right answers, Square’s founders were prepared for every single conversation they needed to have with potential investors. And, to no one’s surprise, the two co-founders had no trouble finding investments. Furthermore, “140 Reasons Why Square Will Fail” also received huge attention from the tech press, so the company started creating a buzz even before it was officially formed.
Through a clever tactic and a bit of charisma, McKelvey and Dorsey pulled off one of the most memorable startup beginnings in recent history. However, that was only the beginning of their growth hacking strategy. An impressive start, but a start nonetheless.
Image source: Flickr
How the Square Company Took the Credit Card Industry by Storm
After garnering early notice from the tech press and investors, funds started coming in from all sides and the new company was quickly ready to see the light of day. And, just like the two co-founders were promising all along, Square made credit card payments accessible to the average small businesses from the moment it hit the market.
As an additional way of boosting the initial phases of the company, Dorsey promoted Square through demonstrations held with selected vendors. The goal behind this move? Showing just how easy it was to use the product and establishing it as a reliable option for venues. This not only got Square early clients, but it also set a customer-oriented tone that only built further on the product’s already encouraging initial reputation. Dorsey and McKelvey also used this opportunity to fully optimize their product in accordance with the feedback they received from the first customers.
All the effort Dorsey and McKelvey put into building up Square paid off almost instantly. They put their product on the Apple store, charging only $10 per order. Once a user would activate an account, the company would automatically ship out a free card reader that would arrive within 7 to 10 business days. Looking back at it now, it’s apparent that Square’s rapid growth was also in part due to its app’s eye-catching design. Its interface served to only further emphasize how different of a product Square is when compared to its limited competition, which naturally resulted in a surplus of word-of-mouth recommendations.
Between an affordable price and the user-centered experience they offered, Square got a large number of downloads on the iOS platform. This resulted in a significant partnership with Visa that allowed Dorsey and McKelvey even more room to grow their new company.
In what seemed to be a blink of an eye, Square became an integral part of small businesses which were finally able to start accepting credit card payments and start growing as a result.
And, in return, Square became a leading figure of the credit card payment industry.
Image source: The Verge
What We Can Learn from Square’s Rise to Fame
In January 2014, about five years after Jim was unable to sell his glass art at a fair, Square was estimated to be worth about $5 billion. The new company asserted itself as a must-have for small businesses craving for a solution to a long-unmet need. And you know what? Square didn’t get there by accident.
First and foremost, Square solved a real problem that related to the number one priority of their target customers—and it managed to do so while allowing clients to make more money.
The two co-founders also made sure that the product reached all the right customers and that the onboarding process was as easy and low-risk as possible. There was no hassle or friction. Square did not require a contract or monthly service bill, and it didn’t ask for a merchant service fee. Just compare this to the traditional payment processor model which required a detailed application, a phone call audit and an expensive equipment purchase and/or lease, and you’ll see how little of Square’s success depended on chance.
After figuring out a perfect product for what they had hoped to achieve, co-founders of Square set in motion a series of highly unorthodox moves. They started out by seemingly pointing out 140 problems their product had. They made unusual partnerships that drove distribution and credibility, fueling growth among their target customers. They built Square around the goal of solving a problem, not earning money. They sent out free products during the initial phases. They didn’t ask for fees or outlandish prices for their product.
And, ultimately, they delivered on their promise to solve small business credit card challenges.
As you can see, Jim McKelvey and Jack Dorsey not only nailed the obvious problem on the head, but they also took it a step further and gave customers more than they ever thought was possible.
That, combined with an impressive series of all the right and out-of-the-box moves, was Square’s recipe for success.