Block (Square)

Magic AI

Block (Square)

Block makes money across several business lines. Square (the seller ecosystem) charges merchants a flat percentage per transaction — 2.6% + $0.10 for in-person payments, higher for online.

Cash App takes a fee on instant deposits, Bitcoin trading, and Cash App Pay transactions. Afterpay (announced at $29 billion in 2021, though Block's share price fell so far before closing in January 2022 that the final price was closer to $14 billion) earns merchant fees on buy-now-pay-later transactions.

TIDAL is the music streaming service (acquired from Jay-Z). Block also earns Bitcoin revenue — Cash App is one of the largest Bitcoin brokers in the US, though margins on BTC trading are razor-thin.

Magic AI

Magic is building an AI that works like a software engineer, not a chatbot. The goal is a model you can hand a whole code base and a task, and it writes, reviews, and debugs like a teammate.

Their edge is memory. In 2024 they showed off LTM-2-mini, a model with a 100 million token context window.

To put that in perspective, that is about 10 million lines of code the model can look at in one shot, by far the biggest of any model at the time. The plan is to sell this as an AI coworker to companies that write a lot of software.

As of the 2024 rounds, the product was still not for sale.

Block (Square)

The origin story starts with Jim McKelvey, a glass blower in St. Louis and old friend of Jack Dorsey.

In 2009, McKelvey lost a $2,000 sale on a glass faucet because he couldn't accept credit cards. The customer wanted to pay with Amex.

McKelvey couldn't process it. The sale fell through.

McKelvey called Dorsey, who had been pushed out of the Twitter CEO job the year before and was serving as its chairman, and they started brainstorming. The problem was obvious: millions of small businesses, street vendors, farmers market sellers, and independent contractors couldn't accept credit cards because merchant accounts required monthly fees, credit checks, and clunky hardware that cost hundreds of dollars.

Dorsey and McKelvey wanted to make it so anyone could accept a credit card using just their phone.

They built a tiny white card reader that plugged into a smartphone's headphone jack. The reader cost almost nothing to manufacture and Square gave it away for free.

The software was simple — swipe the card, enter the amount, the customer signs on the screen, done. Square charged a flat 2.75% per transaction with no monthly fees, no contracts, and no minimums.

The product launched in 2010 and spread through small businesses like wildfire.

Magic AI

Eric Steinberger and Sebastian De Ro started Magic in 2022. Steinberger is an AI researcher who became convinced that the missing piece for a true AI software engineer was memory.

Chatbots forget what you told them a few thousand words ago. He wanted a model that could read your entire code base and remember all of it.

They raised a small seed in 2022, then a $23 million Series A in early 2023 led by Alphabet's growth fund CapitalG. From day one the pitch was not a chatbot.

It was an AI colleague that could handle real engineering work.

Block (Square)

Square grew by giving away the hardware. The card reader was free.

That eliminated the biggest barrier for small businesses. A food truck operator, a yoga instructor, a farmers market vendor — anyone could start accepting cards in five minutes without spending a dollar upfront.

Square made its money on the transaction fees that followed.

The simplicity was the pitch. Traditional merchant services involved contracts, monthly minimums, tiered pricing, and hidden fees that required a finance degree to understand.

Square charged one flat rate for everything. No surprises.

That transparency built enormous trust with small business owners who had been burned by traditional processors.

Cash App grew through peer-to-peer payments and a brilliant viral strategy. The app launched in 2013 as a simple way to send money to friends.

Rappers, influencers, and content creators started using their $cashtag for tips and payments. Cash App sponsored hip-hop events and partnered with musicians.

By 2024, Cash App had over 55 million monthly active users — more than most banks.

Magic AI

Magic's strategy is research first, product later, which is both unusual and expensive. Instead of shipping an app and iterating in public, they raised huge sums to chase a technical breakthrough in model memory.

The headline move was the 100 million token context claim, which got the whole AI world talking. They also cut a deal with Google Cloud in 2024 to build two supercomputers, called Magic-G4 and Magic-G5, using NVIDIA chips, to train bigger models.

Star backers like Eric Schmidt served as validation. The bet is that if the tech is far enough ahead, the product and the customers follow.

Block (Square)

The Afterpay acquisition was controversial. Announced at $29 billion in 2021, it closed in January 2022 at roughly half that after Block's own stock fell.

Buy-now-pay-later was already facing regulatory scrutiny and growing delinquency rates. Critics argued Dorsey overpaid at the peak of the market.

Afterpay's revenue growth slowed significantly after the acquisition, and write-offs on bad consumer debt increased. It remains the biggest bet Block has ever made.

The Bitcoin obsession worries investors. After renaming Square to Block in December 2021, Dorsey went all-in on Bitcoin — investing company cash in BTC, building Bitcoin mining hardware, and creating TBD (a Bitcoin-focused developer platform).

While Cash App's Bitcoin revenue is huge on paper ($10+ billion annually), the margins are tiny. Investors question whether the Bitcoin focus distracts from the core payments business.

Competition is intense on every front. Square competes with Stripe, Toast, and Clover for merchants.

Cash App competes with Venmo, Zelle, and Apple Pay for consumers. Afterpay competes with Klarna, Affirm, and bank-native BNPL products.

Block has to fight multiple wars simultaneously with finite resources.

Magic AI

Magic has raised close to half a billion dollars and, years in, still has no product the public can buy. That is the whole problem in one sentence.

A giant context window is a great demo, but rivals like Cursor, GitHub Copilot, and Cognition's Devin already have real users and revenue. Magic has to prove that more memory actually makes a smarter engineer, not just a bigger number on a slide.

And it has to do that while burning enormous sums on compute against competitors who are already shipping. The clock and the cash both keep running.

Block (Square)

Square is the merchant ecosystem — point-of-sale hardware, payment processing, invoicing, payroll, loans, and online stores for businesses of all sizes. Cash App is the consumer side — peer-to-peer payments, direct deposit, investing, Bitcoin buying, and the Cash App Card (a debit card).

Afterpay is the buy-now-pay-later product — split any purchase into four interest-free payments. Square Banking offers business checking accounts and loans.

Square Online lets merchants build e-commerce websites. TIDAL is the music streaming platform that pays artists higher royalties.

Magic AI

The centerpiece is Magic's LTM, or Long-Term Memory, model family. In 2024 they unveiled LTM-2-mini, a model with a 100 million token context window, pitched as the key to an AI that can understand an entire code base at once.

The broader product is an AI software engineer, or coworker, that can write and change code across a whole project. The company also announced Magic-G4 and Magic-G5, two supercomputers built with Google Cloud and NVIDIA to train these models.

Much of it is still research rather than a shipping product.

Block (Square)

Khosla Ventures, Sequoia Capital, Kleiner Perkins, Visa, Goldman Sachs, GIC (Singapore)

Magic AI

Magic's backers are a murderers' row of AI insiders. It started with a $5 million seed round in 2022 and a $23 million Series A in early 2023 led by Alphabet's CapitalG.

Then in February 2024 came a $117 million round led by Nat Friedman and Daniel Gross, two of the most connected investors in AI. The blowout was August 2024.

Magic raised $320 million with checks from former Google CEO Eric Schmidt, CapitalG again, Atlassian, Jane Street, Sequoia, and Elad Gil. That pushed total funding to around $465 million, all for a company still building toward its first sellable product.