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squareSquare, the mobile payments startup founded by Twitter creator Jack Dorsey, announced today that it has raised $27.5 million in a round led by Sequoia Capital. The Wall Street Journal reported that the funding valued the San Francisco startup at $240 million, which I confirmed with chief operating officer Keith Rabois.

TechCrunch previously reported that Square was closing a round from Sequoia at a $200 million valuation.

Becoming a truly mass-market company will be “a big challenge,” Rabois acknowledged, but he pointed out that Square is already achieving impressive growth without paying for traditional advertising or other promotions. He said Square is processing millions of dollars in transactions every week, and that it’s signing up 30,000 to 50,000 new merchants every month. Rabois said many of those merchants were previously cash-only, but they were attracted by Square’s ease-of-use (the card-reading device plugs into iPhones, iPads, and Android phones) and low financial risk (Square takes a small percentage of each payment, but the device is free, there are no upfront costs, and no long-term commitments) to start taking credit card payments for the first time.

Beyond the extra cash and impressive valuation, the funding also creates another connection between Square and the group of original PayPal executives who are known as the PayPal Mafia. Rabois joined Square from social startup Slide (which was itself led by PayPal co-founder Max Levchin), and he previously held executive roles at PayPal. Now Sequoia Capital partner Roelof Botha, who was PayPal’s chief financial officer, is joining Square’s board of directors. (Sequoia reportedly beat out Kleiner Perkins Caufield & Byers and Benchmark Capital to lead the deal.)

Bringing those connections to Square seems particularly important, given the company’s ambitious plans for upending the payments industry. (Building out the financial infrastructure has already caused the company some delays.) Rabois compared the complications involved in building a service that works with existing financial institutions and regulations to building a spaceship.

Rabois acknowledged that he and Boetha are connected through PayPal, but he also said that Sequoia has a long history of investing in financial service companies. Sequoia’s partners are also “product and design connoisseurs”, he said, which makes them a good fit for Square’s goal of making payments seem “magical”.

Khosla Ventures, which led Square’s $10 million first round of financing, also invested in the new round.

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