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Square Dumps Caviar, Tightens Its Circle of Focus

Late last week, Square — a key disruptor in the small and very small local business space — chose to sell off its Caviar food delivery business to DoorDash.

We recently wrote about DoorDash’s PR snafu when it was revealed that tips presumably paid to drivers wound up in the corporate account. The company has since pledged to change the policy.

According to some analysts estimate Square will realize a nearly 10X return on its Caviar investment, having paid $44 million when it purchased the company five years ago and now selling it to DoorDash for $410 million.

Our sense is that the choice to be in a vertical — food ordering and delivery — was forcing Square to apply engineering resources to features that couldn’t be pushed across their entire customer base.

So it has made the wise decision to move on from having to reliably deliver food and can now apply all of its effort and resources to its core business solutions. Those core solutions according to center around the payments ecosystem which includes processing transactions (and the associated hardware) and making loans to small business owners.

Now that Square has cashed out of its bet on food delivery, we wonder about the role payroll plays in Square’s product vision. What’s notable about payroll is that it is a horizontal solution and all of Square’s customers — to the extent that they hire employees — can leverage the application. But it is not something Square seems to want to talk about, nor does it attract much coverage.

Perhaps it should, given SMB payroll is a nearly $100 billion market — based on the combined market value of market leaders Paychex and ADP.

We’ve written extensively here about HR/payroll disruptor Gusto, including its recent $200 million venture round. Gusto is intensely focused on human capital and the applications that surround payroll. Square, on the other hand, seems focused on payments and the applications that hang off of that core feature set.

The question remains, where is Square in the development of its payroll business, and how strategic will it be to the company in future quarters? Perhaps Gusto will come calling. Perhaps they already have.

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