Square Said to Seek $250 Million Investment

Jin Lee/Bloomberg NewsJack Dorsey, the head of Square and the executive chairman of Twitte

Square, the mobile payments company, is passing the hat again.

Less than one year after raising $100 million, which valued the company at $1.6 billion, the company is going back to its investors. It is now seeking to raise as much as $250 million at a $3 billion to $4 billion valuation, said people briefed on the matter, who requested anonymity because discussions are private and still continuing.

It’s a bold move by Square’s chief, Jack Dorsey, who effectively holds two full-time jobs as the head of Square and the executive chairman of Twitter.

At both start-ups, Mr. Dorsey is trying to manage vast expansions as both are still struggling to build sustainable business models. Twitter has more than 140 million active users, who are sending some 340 million messages a day. Square, an application that allows people and small businesses to pay and collect money through their mobile devices, is processing about $4 billion in transactions a year.

Square, founded less than three years ago by Mr. Dorsey, has not had trouble raising capital thanks to its rapid growth and Mr. Dorsey’s reputation in Silicon Valley as a co-founder of Twitter. It has secured financing from several prominent investors, including Sequoia Capital, Khosla Ventures and Kleiner Perkins Caufield & Byers, the venture capital firm that led its last investment round.

Still, the business doesn’t make a lot of money on a per-transaction basis. It scrapes a small fee from every transaction made on Square, which it shares with credit card companies. To become enormously profitable, it will need to increase its merchant base drastically to generate enough transactions. It’s a particularly challenging feat, given the hyper-competitive nature of the mobile payments market.

AllThingsD earlier reported Square’s plans for another investment round.