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How Block Grew to $18B revenue in just 13 years: 1. Find a Massive Problem 2. Make a Simple Solution 3. Price for Growth 4. Make Signup Easy 5. Solve Adjacent Problems 6. Build Both Sides of the Network 7. Monetize with Additional Products 8. Connect Network Effects

Lesson 1: Find a Massive Problem In 2008, Twitter fired Jack Dorsey. Jack went back to his hometown, St. Louis, Missouri. He began chatting with several childhood friends about starting a new company. One of those friends was Jim McKelvey.

One day, Jim had worked out a deal to sell $2,000 of his glass artwork. But the buyer did not have enough cash. Jim couldn’t accept credit cards, and the deal fell through.

Jim realized that it was too hard for small merchants like himself to accept credit cards. This was especially crazy given what else his iPhone could do: everything from surf the web to play music. He shared the problem with Jack. Jack agreed it was a huge problem.

Lesson 2: Make a Simple Solution They realized there was an opportunity as Jack said: “To really design the product experience, the payment experience, which, to my mind, no one has designed before.”

By February 2009, Jim and Jack had created a prototype headphone dongle that would accept credit card payments. It was ingenious to design a solution with cheap components that could work through the headphone jack.

In a coup, the team also worked out agreements with Visa, Mastercard, and American Express to take Square payments. It was a complete card acceptance solution. As Jack said on Charlie Rose, “It’s really complex to make something simple.”

Lesson 3: Price for Growth One of the most innovative aspects of the Square Reader was its pricing. Unlike the nearly $1000 machines merchants had to buy before Square, Square’s dongle was free. Being $500 would have been cheap. $50 would have been mind-blowing.

The Square reader was just completely free. Instead of a huge upfront dongle fee, Square charged 2.75% of the transaction. This was far lower than the 4% most processors charged small merchants.

As a result of pricing for growth, Square had to keep its costs as low as its prices. There was no live support - no phone number to contact. This forced Square to design innovations that removed the need for customers to reach out for support.

Lesson 4: Make Signup Easy The entire process could be completed online. There was no credit check or paperwork. You didn’t have to wait weeks. The decision was instantaneous. Moreover, Square had no contracts. You didn’t have to read and sign a 40-page document.

Signup and use were 100x easier than the alternative. All these innovations made Square’s growth meteoric. It grew 10% per week for its first two years. By the start of 2011, Square was processing close to a million dollars in gross merchandise value (GMV) a day.

Lesson 5: Solve Adjacent Problems But the Square team wasn’t done there. What it found in launching the reader was that customers had more needs than just a credit card processor. They needed to replace the cash register entirely.

As a result, the company released Square Register. It solved several adjacent pain points for the merchant: 1. Inputting price information 2. Using paper receipts for signatures 3. Having data about what you sold Square invented the now ubiquitous tablet terminals.

In 2013 the company would launch its second most important product: the Square Cash App. The P2P payments app allowed anyone with a debit card to send up to $2,500 a week for free.

In 2014, it added functionality so that you can request money to just a phone number over text, without the other end requiring the app. Cash felt more like a social app, not a banking or finance app. This was a clever growth strategy.

Lesson 5B: Grow Products via Ecosystem Square began establishing what has been called, “The Square Ecosystem.” Square was leveraging the great data generated by its payments & POS products to generate several other value added services for customers.

These include financial services like Capital, analytics and employee management services associated with POS, and marketing services. These moves worked very well. Things continued to go swimmingly at Square throughout 2015.

In November 2015, Square IPO’d, with a 24% day one pop. That valued the company at just under $3 billion. It would turn out to be a steal. Since then, the company has over 20x’d its valuation. (At its peak valuation in February 2021, it had 50x’d).

Lesson 6: Build Both Sides of the Network The company has really built out the consumer side of its network since IPO. Square released a virtual debit account, allowing customers to store funds in their square cash accounts. It led to an inflow of new underbanked customers.

To monetize these new customers, the Cash App began offering instant deposits on P2P transfers for a 1% fee. Previously, many transactions were processed the same day. But the company slowed those down to post the next business day to promote instant transfer monetization.

Square was making the move far beyond peer-to-peer payments for Cash App. As Jack explained: "We don't consider this a peer-to-peer app and stop. We consider it much more and really around providing financial access to people"

Lesson 7: Monetize with Additional Products In January 2018, Square announced Cash App would support bitcoin trading for all users. Just three years later, in 2021, Bitcoin would generate $10B of revenue for the company in a single year.

In addition to Bitcoin trading, another major launch was direct deposit. Between Cash Card, payments, and direct deposit wallet, Square could now offer most of the services of banks. This led to continued growth for Cash App with the underbanked.

The team followed up those launches with Boost. Boost is the name for Cash App’s loyalty program, where users can earn instant cash back boosts at select coffee and food chains. It proved to be a great driver of engagement for the Cash Card and Cash App.

With the success of direct deposit, Bitcoin, and Boost, in 2019, Square launched stock trading. Stocks proved to be another hit. As a result, over the year 2019, Cash App revenue more than doubled, as these products' effects started to compound.

Lesson 8: Connect Network Effects In 2021, Square would make its biggest acquisition ever. It acquired Afterpay for $29B all in stock. At 42 times trailing twelve month Afterpay sales, it was a hefty acquisition price.

But Square made the purchase to connect its two ecosystem’s network effects. Afterpay is the glue between the Square and Cash App ecosystems. Afterpay will be integrated into both sides of Square’s ecosystem.

Afterpay integrates with merchants to appear on the checkout, which helps get consumers. Then they create a compelling consumer marketplace of merchants to funnel them back. The merchant-first company has become the payments and money company.

In Summary: