What I Was Missing About SQ

On a bus ride and on my phone so forgive the grammar errors and sporadic thinking…Currently listening to their recent conf call and have a few takeaways that are making me want to substantially increase my investment in SQ (in addition to their great growth #s)

  1. Square Cash: when asked about it, Jack Dorsey alluded to the fact that this is a way to serve the underbanked and underserved. They used this approach for merchants which is what SQ started as but…

He is very excited about the opportunity to do the same for consumers.

  1. Weebly: I wondered why they acquired Weebly. Were they trying to take market share from Shopify?

Their CFO talked about Weebly’s international customer base and data. This gives SQ a lot of insight into international growth opportunities outside of their current verticals.

They talked about going into towns where merchants are 90% cash only and transitioning them to 90% credit accepting. This is a massive opportunity.

  1. About competing with Shopify: they didn’t say this directly. These are my thoughts.

I don’t think they are focused on competing with Shopify, but the approach they are taking is going to make them naturally grow an ecosystem that will compete with Shopify. On top of that, I think Square will have a better ecosystem and higher quality merchants than Shopify merchants.

Why? SHOP and SQ are almost taking opposite approaches.

Shop starts with the ability for people to quickly and cheaply open a new business and sell online. Then they have built on top of that by offering new products. Capital, Shipping, Plus, etc. Shop will have some very high quality merchants and many not so high quality ones.

SQ started on the opposite end. Offering POS solutions to underserved merchants with physical retail spaces. From there they are learning, imoproving, and expanding based off of data and customer requests. They are now building an ecosystem which will enable those merchants to go online and expand internationally.

Basically, I think the fact that SQ starts at the core of a business. With their ability to accept payments and grows from their makes them much stickier than Shop for high quality merchants. So I think SQ is more sticky.

  1. Cavier: I also didn’t appreciate the growth potential for Cavier. This product alone can create an entirely new market for delivery of not only food, but if they want to expand, any number of verticles.

Shop has been a small position for me for several months now. I will probably keep that small position and just put new investment $ into SQ.

I think I was and probably still am greatly underestimating their long term growth potential. Especially as the big credit card companies face pressure to lower rates. In the future why would people stick with the big expensive credit cards if SQ offers a cheaper, easier to use, broader offering?

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Also really really cool that they include seller questions on their conf calls not just analysts.

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