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Square is on a mission to diversify, and it’s turning to the red-hot food delivery industry to do so.
The payments company run by CEO Jack Dorsey plans to announce this week that it has acquired San Francisco-based Caviar, according to a person familiar with the deal. Caviar runs a service that lets consumers order meals to be delivered to their homes or offices from restaurants that don’t normally offer delivery.
Caviar will receive only Square stock in the transaction, this person said. The New York Times reported on Friday that the deal, which was first reported by TechCrunch, will be valued at $90 million.
A Square spokesman and Caviar CEO Jason Wang declined to comment.
A move into delivery by most payments processing companies would be a head-scratcher. But it could make sense for a company in Square’s position. It has been furiously expanding the menu of services it offers over the last few months as it attempts to add new revenue streams that would help justify its $5 billion valuation.
Among the new products are a merchant cash advance program called Square Capital, a customer survey product called Square Feedback and a food pickup app called Square Order, which replaced the failed Square Wallet. The question remains whether Square is betting on the right new products and services or grasping at straws. In the world of food delivery, Caviar faces fierce competition from companies such as DoorDash with similar propositions as well as traditional delivery companies such as GrubHub.
With Caviar on board, Square could in theory offer the delivery service to restaurants and cafes that already run on its payments system, in a package deal or a la carte. It’s not clear what percentage of its customer base are restaurants and cafes. The company could also give restaurants and cafes that already work with Caviar a discount to start processing payments through Square.
On the consumer side, Caviar could eventually be integrated into Square Order, so customers could browse pickup and delivery options in their area from the same app. (Caviar hasn’t yet released its own app, which it has been able to get away with since about 50 percent of orders come from businesses for office meals.)
In the interim, Caviar gives Square an immediate delivery presence in around 10 U.S. cities. Its restaurant customers include big-city staples such as Momofuku in Manhattan and Nick’s Crispy Tacos in San Francisco.
The company charges customers $9.99 per delivery, though it recently told Re/code it would soon be dropping the fee to $4.99. Caviar takes anywhere from 10 percent to 25 percent of the bill as its cut from the restaurant. It has 70 employees, not including the independent contractors it pays $15 per order to pick up and deliver the food. Wang recently told Re/code that the company turned a profit three months after launch, but has since slipped into the red as it spends cash to accelerate growth.
It has raised $15 million in funding from investors including Andreessen Horowitz and Tiger Global. Perhaps its best-known competitor, DoorDash, recently announced a $17 million investment led by Sequoia Capital.
Additional reporting by Liz Gannes.
This article originally appeared on Recode.net.
