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Block, formerly known as Square, evolved from offering a simple card reader to becoming a $75 billion financial services and software business. It expanded to serve micro, small, medium, and large businesses, consumers, and developers with a mission focused on economic access. With over 40 products across hardware, software, and financial services, Block combines capabilities uniquely while experiencing organic growth.
Block's organizational structure revolves around two main ecosystems: the Square ecosystem and the Cash App ecosystem. The Square ecosystem caters to small, medium, and large businesses, providing payment processing, software solutions, loans, and more. The Cash App ecosystem focuses on consumer financial applications, offering features like peer-to-peer payments, stock trading, and Bitcoin transactions.
Block serves approximately three million merchants in the US and boasts about 100 million annual active users on the Cash App. With a gross profit business exceeding $5 billion, Block's scale rivals major financial institutions in the US. Notably, the company's focus on customer acquisition and retention has led to strong unit economics and remarkable growth, with innovative products driving revenue and enhancing user engagement.
Square's success lies in its modern technology stack that allows for fraud management and enhanced customer experience. By using data effectively, Square can prevent fraud, add value to customers and merchants, and create a seamless ecosystem. The company's focus on improving customer experience, brand resonance, and fair ecosystem sets it apart in the competitive landscape.
Square's strategic acquisitions, like Afterpay and Tidal, showcase its aim to delve into underserved markets and enhance its offerings. Afterpay aids in merchant discovery, driving engagement and potential revenue opportunities. Tidal's acquisition exemplifies Square's vision to revolutionize the music streaming business by focusing on artist empowerment and customer experience.
Square's involvement in Bitcoin reflects its commitment to economic empowerment and global currency adoption. The company's initiatives around Bitcoin, like Spiral and focused hardware products, align with its mission. While there's potential risk with Bitcoin, Square's emphasis on innovation, leadership consistency, and customer-centric strategies position it well for growth and resilience in the financial services industry.
For builders, lessons from Square emphasize the significance of a compelling mission, customer-centricity, and empowered leadership for success. Investors can learn that innovation and dedication often drive growth more than market size alone. Those interested in exploring Square's journey further can listen to related podcasts, business breakdowns, and company insights shared by key personnel.
This is Jesse Pujji and today we’re breaking down Block – formerly known as Square. This software and financial services business was founded by Jack Dorsey and Jim McKelvey in 2009. It has since expanded from its first product – a payments card reader – into a $75 billion market cap with six businesses that build on the firm’s mission of economic access and empowerment. Those are: Square, Cash App, Afterpay, Tidal, Spiral, and TBD.
To break down Block, I’m joined by payments expert and investor at TDM Growth Partners, Hamish Corlett. We cover the common threads that have enabled Block to organically build two major ecosystems in Square and Cash App, how the recent Afterpay acquisition can strengthen the connective tissue between those businesses, and the competitive frontiers Block faces. Please enjoy this business breakdown of Block.
For the full show notes, transcript, and links to the best content to learn more, check out the episode page here.
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Show Notes
[00:02:52] - [First question] - What is Block and what it does as a business
[00:04:58] - How is Block organized, their scale, and how many merchants they serve
[00:08:03] - Their founding story and the insight that lead to creating Block
[00:10:49] - Major milestones in the last decade after releasing their card reader
[00:13:47] - The story behind their Cash App and what it is
[00:18:59] - What Afterpay is and how it creates connections for merchants
[00:21:23] - Overview of the payment ecosystem and where Block fits into it
[00:25:03] - The P&L of Square, its blended gross margin, and customer acquisition strategy
[00:30:42] - How Cash App makes money and its P&L
[00:35:54] - The balance sheet of Block and how they’ve stood out in a competitive space
[00:38:31] - The ways their product organization allows them to move at a rapid pace
[00:40:30] - How they avoid fraud that’s seemingly everywhere in financial service businesses
[00:42:01] - His thoughts on the competitive environment and how they’re succeeding
[00:47:56] - Highlights of M&A and how they reconcile them with their overall strategy
[00:54:44] - Their view on Bitcoin and crypto and how it plays into Block’s business
[00:59:09] - Things that could happen in a macro environment to aid their future growth
[01:01:30] - What could go wrong in the future and the macro environment’s impact
[01:03:49] - Lessons for builders and investors when studying Block’s story
[01:06:20] - Places to go to learn more about Block
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