Bloomberg Businessweek (North America)

No One Wants to Be ‘the Next Square’ Anymore

Startups ▶ Abroad, card-reader clones start to sound a little desperate ▶ “You can see that their market is actually quite limited”

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A year ago, Vancouver startup Payfirma’s nickname, the Square of Canada, was a badge of honor. Payfirma’s smartphone-compatible credit card readers were in high demand, and local investors supplied $13 million in funding. Like Jack Dorsey, the chief executive officer of Square (and Twitter), Payfirma CEO Michael Gokturk said he was aiming for “hypergrowt­h.” Gokturk doubled his staff to 80, including a chief operating officer formerly at Intuit, and started talking about an initial public offering.

Whoops. In November, Square went public with a market value of about $2.9 billion, less than half its private valuation from a year earlier. In the runup to the IPO, analysts began questionin­g whether the card-reader maker should really be priced like a highflying tech company in an era of mobile payment apps. Its stock price is hovering at about $13, right where it was after its first day of trading. Square declined to comment.

“Now that they started going through the rigors of a public market, you can see that their market is actually quite limited,” says Gil Luria, an analyst at Wedbush Securities. “It’s going to be much harder going forward for companies that try to emulate their model to raise capital.”

At Payfirma, Gokturk says he was forced to admit that recruiting 40 people didn’t help with the company’s stalled U.S. expansion—or much else. “We were still doing the same results, from a sales perspectiv­e, from a revenue perspectiv­e, with a doubled staff,” he says, declining to provide revenue figures. “We made the mistake of overhiring and hoping that we were going to raise more money.”

Eventually, Payfirma cut 30 of its 80 employees. Afterward, Gokturk published a blog post on the company website asking Vancouver’s other businesses to hire the workers who’d been

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