His new startup has lots of potential: they give away a small plastic dongle that plugs into any device with a headphone jack (as of now the software exists only for iPhone and iPod touch) and lets anyone take payments from credit and debit cards.
Dorsey tried to demo the device on stage by charging Loic Le Meur $37.00 (!) and, well, spent several painful minutes failing to do it. First he couldn’t swipe the card fast enough to activate the dongle, and then it wouldn’t connect over the wifi (which was working great in the room).
After many tries and app reboots he managed to do it over 3G. Le Meur assured us that it worked flawlessly backstage and Dorsey called it his “worst demo ever.”
A funny moment came when Dorsey revealed that he’s made over $650 so far charging people’s credit cards to demo the service (he said he donates it to charity) — especially VCs, whom he charged $25.00.
Does this make Dorsey the only entrepreneur who can charge VCs to have him pitch?
I tracked down Dorsey backstage where he was being mobbed by the press (and where he gave another demo on the spot, which went smoothly). I was finally able to ask him what I’ve wondered about Square ever since I’ve heard of the concept (a very French question): a main reason why merchants refuse to take plastic is because cash is off the books; how does Square address that?
Dorsey said they’re not planning to address it specifically. He noted that while many people think managing cash is easy, it’s actually very expensive (keeping track of transactions, having change, securing it…) and Square helps them mitigate that cost.
They’re also trusting that loss of business through refusing plastic will be more expensive than taxes and transaction fees and merchants will adopt it (good luck pitching that to French café owners).
Dorsey said that Square’s business model will probably revolve around transaction fees, since Square has to pay fees to the credit card companies anyway; they “hope” there’ll be “some margin there”.
Dorsey didn’t say it, but I think there’s potential for Square for advertising, since it keeps track of repeat customers and can therefore help merchants with loyalty programs and the like.
Le Meur and Dorsey also spoke of the history of Twitter. What I didn’t know is that back in 2000 Dorsey built an early version of Twitter, based on email, that absolutely nobody used and all his friends thought was silly. Le Meur bounced off that to say (quite rightly in my view) that this shows that even if people think your idea is stupid you should roll with it and not let yourself be discouraged.
More Le Web coverage here.
Photo: Robert Scoble