Previous investor Khosla Ventures also participated in the round which sees the start-up valued at around $240 million. Sequoia's Roelof Botha, a former PayPal CFO, joins Square's board.
Square provides merchants with a piece of plastic that fits in to the headphone jack of Android-based handsets, iPhones and iPads, and acts as a card swipe for processing payments. The reader is shipped for free with Square charging 2.75% plus 15 cents for each transaction.
The company finally began a mass roll out of the technology in November after hardware shortages and underwriting issues led to delays. Between 30,000 and 50,000 businesses have signed up to the system a month for the last three months.
Dorsey told the Wall Street Journal that the money would be used to hire staff, taking employee numbers from 64 (including contractors) to around 150 by the end of the year.