Earlier today we wrote about Square , the new payment service cofounded by Jim McKelvey and Twitter creator Jack Dorsey . We also interviewed Dorsey and used Square to buy a coffee. We knew Squared had closed a hyper-competitive venture round. What we didn't know until recently was the size and valuation of that round. Square is valued at a massive $40 million or more after raising $10 million in funding, and the service is yet to launch publicly for anyone to use. Khosla Ventures is taking most of the $10 million venture round, we've heard from multiple sources. This is Gideon Yu's (former Facebook CFO) first investment since joining Khosla Ventures in August. Other investors are joining the round as well, and we're now trying to confirm those individuals and funds. The feeding frenzy around Square isn't just because of it's celebrity founder, say our sources. This is a bold foray into a huge, and complicated, market: physical payments. "What PayPal was to eBay, Square is to the real world," said one person close to the company.