Daily Tech Snippet: Thursday, October 12

• Square, the Mobile Payments Company, Discloses I.P.O. Plans - Lost $77M on revenues of $561M in H1 2015: Jack Dorsey is about to get even busier. On Wednesday, one of the companies Mr. Dorsey runs, Square, the mobile payments start-up, made its initial public offering prospectus public, indicating it is close to a road show to sell stock to investors. The move follows an action-packed 10 days for the technology executive, who was named permanent chief of Twitter last week and who on Tuesday announced that he was laying off 8 percent of the staff at the social networking company as he tries to attract more users to the service. The disclosure of Square’s I.P.O. prospectus is set to quicken the pace for Mr. Dorsey. While the filing revealed that Square’s revenue jumped to $850 million last year, up 54 percent from a year earlier, losses increased to $154 million in 2014, more than in 2013. For the first six months of this year, Square lost $77 million on revenue of $561 million. That means Mr. Dorsey, 38, will need to sell a money-losing Square to investors when I.P.O.s — including recent technology offerings like Pure Storage — have been met with a lackluster reception. In addition, Mr. Dorsey faces questions about whether he can juggle his chief executive roles at Twitter and Square. Taking a company public and navigating the turnaround of another are each tall tasks on their own. Some critics have said Square’s core business does not make enough money to justify the lofty $6 billion valuation that it received from private investors. While Square said that more than two million merchants accepted five or more Square transactions last year, the company’s revenue is not as large as some other technology giants that it is often mentioned alongside. The filing also presented a rocky picture of a key partnership with Starbucks, the global coffee giant, which the two companies entered into in 2012. Square ended up losing tens of millions of dollars on the countless credit card transactions it processed for Starbucks customers, the filing showed. The deal, which is expected to wind down in 2016, will winnow away a significant portion of Square’s transaction volume.

• Square’s IPO Filing: It’s Complicated: Square recorded revenue of about $560 million in the first half of the year, a 51 percent increase over the first half of 2014. For the same period, losses were about flat year-over-year at about $78 million. That doesn’t look great. But a more nuanced look at the numbers, stripping out the Starbucks deal, tells a story of a healthier core business with even a path toward, yes, profitability. As a result, Square is making the case that that deal doesn’t reflect its core business, and it is right: Square loses money on Starbucks transactions, while Square makes money on the transactions it processes for all the other brick-and-mortar businesses it works with. Additionally, the metric subtracts other costs associated with things like stock-based compensation that fast-growing tech companies often argue don’t reflect the health of their main business. In the first half of the year, Square narrowed its Ebitda losses to $19 million from $44 million in the same period last year. And in the second quarter of this year, Square actually recorded an adjusted Ebtida profit, even if just barely. That’s a good sign.

• Jack Dorsey owns 24.4% - i.e. a lot -  of Square: No wonder Jack Dorsey wants to keep running Square. Dorsey, the payment company's chief executive officer who also just took on the same role at Twitter, is the largest shareholder in Square by a wide margin, with 24.4 percent. The investment firm Khosla Ventures is the second-largest with 17.3 percent, according to Square's registration for an initial public offering filed Oct. 14. Dorsey's sizable stake indicates that he was savvy enough to keep control of the company he co-founded. Dorsey's high-flying reputation as a Twitter co-founder helped him negotiate more favorable terms for Square than an untested entrepreneur trying to raise money could. Contrast Dorsey's position with that of, say, Box CEO Aaron Levie. When the file-storage company filed for an IPO in January, the 30-year-old Box co-founder owned 4 percent. While that still makes for a nice payout, six venture-capital firms owned more shares than Levie when the company went public. Or look at Dorsey's first venture, Twitter. Evan Williams, a Twitter co-founder along with Dorsey, provided the company with early financing, which helped him maintain a 12 percent stake by the time it went public. Meanwhile, Dorsey had 4.9 percent. This month, Dorsey was named "permanent CEO" of an ailing Twitter at the same time Square was prepping for an IPO. He's said he can handle both jobs, but investors are wondering how that will play out. In terms of ownership, he's got a lot more eggs in Square's basket. "There are so many incentives for him to just spend all his time on Square," Lemkin said.

• Amazon Shutters Hotel-Booking Site After Six Months: Amazon.com Inc. has shuttered its hotel booking site "Amazon Destinations" six months after its start, signaling the world’s largest e-commerce company couldn’t persuade many of its customers to book weekend getaways. The Seattle company introduced the site in April hoping to expand on its Amazon Local initiative connecting shoppers with deals close to home. The destinations site featured maps, lodging offers and information about restaurants at popular weekend getaways near Los Angeles, New York City and Seattle. Amazon Destinations stopped selling reservations on Tuesday, according to an announcement on the website. "If you have a reservation, your reservation is valid and will be honored by the hotel," the site states. “We have learned a lot and have decided to discontinue Amazon Destinations,” the company said Wednesday in a statement. The business pitted Amazon against Web travel businesses Priceline Group Inc., Expedia Inc., startup Airbnb Inc. and others for a piece of the online hotel booking market. 

• Shopify partners with Uber to ensure same-day delivery: Canadian e-commerce platform Shopify said on Wednesday it was partnering with taxi-hailing service Uber to help merchants deliver goods to customers on the same day in New York City, Chicago and San Francisco. Shopify said the UberRUSH delivery service will be available to its merchants in the three cities immediately. U.S. department stores such as Kohl's and Macy's Inc offer same-day delivery services via a tie-up with Deliv, an Uber-like startup that contracts drivers to pick up ordered items from stores and deliver them to customers. The agreement with Uber is the latest in a series of major tie-ups announced by Ottawa-based Shopify. Last month, it inked a tie-up with the U.S. Postal Service, making it more attractive for smaller U.S. retailers to use its software to power their e-commerce sites. Just prior to that, Amazon.com also made Shopify its preferred partner for smaller vendors that are seeking to sell their goods via the online retailing giant. Although the rapid delivery services appear to compete with Amazon's own speedy shipping options, the tie-ups with Uber and USPS will not put Shopify on a collision path with Amazon said Brennan Loh, Shopify's head of product partnerships, who added that smaller vendors would still look to sell their products via Amazon due to its much broader reach, in comparison to their own portals.

• Behind the Failure of Leap Transit’s Gentrified Buses in San Francisco: Leap, which raised $2.5 million from some of the industry’s best-known investors, charged riders $6 to get across San Francisco, nearly three times the cost of riding a city bus. Its primary draw was luxury. Each bus had a wood-trimmed interior outfitted with black leather seats, individual USB ports and Wi-Fi. The buses also offered a steady stream of high-end snacks, sold via app. The luxury vehicles were up for auction; Leap filed for bankruptcy in July. The end for Leap apparently came so suddenly that its founders didn’t have time to remove much from the vehicles. Inside each bus, sitting in an out-of-the-way parking lot near Oakland, Calif., was a state registration form pinned to the wall, a bundle of iPhone and HDMI cables, and a display case full of snacks. Among the choices were packages of That’s It — vegan, gluten-free, non-G.M.O. fruit bars — and organic, paleo Simple Squares. Leap is one of at least several dozen tech companies that have failed this year. Their deaths are illuminating; dead start-ups show us which investors’ theories are bogus, which technologies aren’t ready for prime time and which common ways founders overextend themselves. In particular, Leap’s death suggests one emerging cause of start-up doom, a problem that also did in the anonymous social network Secret: too close an association with Silicon Valley’s tech-bro sensibilities. Start-up deaths often go unstudied. Silicon Valley stands out for the way it embraces failure, and it’s true that the “We Failed!” start-up post-mortem note has become a staple on publishing sites like Medium. By the time of its bankruptcy auction earlier this month, which attracted only a handful of bidders, Leap was all but forgotten. In its bankruptcy filing, Leap reported that it made nearly $21,000 in the two months during which it offered service. That turned out to be less than two of its buses — which officials told me could no longer start — fetched at auction: One sold for $11,100, and another for $12,100.

• Twitter has appointed Omid Kordestani, who until recently was Google’s chief business officer, as its executive chairman. Mr. Kordestani, who has a reputation for affability and business acumen, could bring a level of calm and stability to Twitter, which has been plagued by management chaos it its nine-year history. A company spokesman said Mr. Kordestani was unavailable for an interview but said he would play an active role in operations, supporting the leadership team and helping with recruiting. His appointment is the latest in a series of quick decisions by Mr. Dorsey, who announced on Tuesday that Twitter would cut up to 8 percent of its staff. Mr. Kordestani was the 11th employee hired at Google. He joined in 1999, when it was a year old, and helped create its primary business of selling the ads that appear in Google searches. His original title was “business founder” and he oversaw Google’s first dollar of profit and built its first sales team. That model has since generated hundreds of billions of dollars and still accounts for more than half of Google’s annual revenue. Mr. Kordestani left the company in 2009 but came back last year after his successor, Nikesh Arora, quit to join SoftBank. As chief business officer, he was Google’s highest-paid executive in 2014, with a $130 million pay package that consisted mostly of stock vesting over four years. Mr. Kordestani does not appear to be a regular user of Twitter. Before his appointment, he had sent just eight tweets on his personal account. Some Twitter investors, most notably Chris Sacca, have complained that Twitter has too many board members who “don’t use the product.”