The Little Reader That Could
The story starts with a simple, brilliant idea. In 2009, co-founder Jack Dorsey’s friend, Jim McKelvey, lost a sale for his glass art because he couldn't accept credit card. This sparked the creation of Square: a tiny, elegant white reader that plugged
into a smartphone, instantly allowing anyone—from artists to coffee shop owners—to take card payments. It was revolutionary, democratizing a system long dominated by big banks with complex fees and clunky hardware. Square didn't just offer a gadget; it offered access, with a simple fee and no long-term contracts.
A Business Bleeding Cash
But there was a fatal flaw in the original model. The little white reader, the very symbol of the company, was a loss leader. Worse, the core business of just processing payments for micro-merchants was barely profitable, if at all. For a time, the firm's business was heavily reliant on brick-and-mortar retailers using its dongle. While it was empowering small businesses, Square itself was in a precarious position. The company was facing an existential threat from Amazon, which launched a competing product. The early vision, while powerful, wasn't a sustainable business on its own.
The Pivot: From Hardware to Ecosystem
The pivot wasn't a single event but a fundamental shift in thinking. Square's leaders realized they weren't just in the hardware business; they were in the business of helping sellers succeed. This led to the creation of a whole ecosystem of software and services. They launched Square Register, turning iPads into sophisticated point-of-sale systems, and rolled out tools for payroll, appointments, and analytics. The company began opening up its APIs, allowing other developers to build on its platform, further extending the ecosystem. The strategy shifted from simply facilitating a transaction to becoming an indispensable partner in a merchant's entire operation.
The Ace in the Hole: Cash App
While the seller ecosystem was growing, another internal project, born from a company hack week, would prove to be an even more transformative pivot. Initially a simple peer-to-peer payment tool called Square Cash, it was a side project that many inside the company wanted to kill because it was a strategic departure and cost time and money. But Dorsey championed it. The app exploded in popularity, evolving into Cash App—a consumer-facing financial super-app for sending money, buying stocks, and trading Bitcoin. This created a second, massive ecosystem for the company, one focused on individuals. It was no longer just a merchant services company; it was now a powerful player in consumer finance, with Cash App eventually accounting for half the company's revenue.
