The funding, which has been rumored for some time, also includes previous investors Khosla Ventures, which led a $10 million round in late 2009.

The San Francisco-based start-up now has a valuation of around $240 million, up from a valuation of around $45 million in its prior round of funding, according to a person familiar with the matter.

Sequoia Capital’s Roelof Botha, who was a former CFO of PayPal, will join Square’s board.

Square charges either 2.75 percent plus 15 cents per transaction if a credit card is swiped, or 3.5 percent plus 15 cents per transaction if a credit card number is keyed into its mobile application. Square’s dongle, which plugs into an iPhone, is free, and the company doesn’t require contracts, setup fees or minimums like many of the competitors do, making it attractive to small merchants.

Mountain View, Calif.-based Intuit announced today that its GoPayment mobile payment service will offer a free credit card reader and no monthly service fees to business owners who sign up by mid-February. Square also faces stiff competition from Visa, MasterCard and American Express, which are all working on mobile solutions.

The cash will be used to build up the company’s team, which currently numbers 64 employees, including contractors. The company expects to grow its staff to 150 by year’s end, The Wall Street Journal reports.

As usual, serial entrepreneur Jason Calacanis makes lemonade from lemons–or is it vice versa?–touting cost-cutting at his human-powered search engine start-up and newest venture, Mahalo, almost as much as he touted its prospects when he started it up more than a year ago with $20 million in funding.

The colorful Calacanis has been around the Web space for a long time, with a range of ventures back in the day, like “Silicon Alley Reporter,” up to the last of which–Weblogs Inc.–was sold to AOL in 2005 for $25 million.

But in a blog post yesterday, Calacanis sang perfectly in tune with the new, decidedly grimmer, times. Thus, he announced the cuts at Mahalo, which include layoffs, with his typical showman style.

The venture was funded by–among others–Sequoia Capital and its wunderkind VC Roelof Botha.

But, after Sequoia lowered the boom on the start-ups it invested in recently, it’s no surprise they are lining up to show how well they can play “Survivor.”

Wrote Calacanis, in part:

Although we’ve got a significant amount of cash on hand, and the business is ahead of schedule in terms of traffic (4m uniques a month, double where we thought we would be at this point), we’re fairly certain that the advertising climate for the next two years will be severely depressed. To ignore this obvious fact would be irresponsible…While I anticipated and prepared for the ‘internet winter’ we’re now facing (you’ve read my posts and e-mails about the startup depression I’m sure), I failed to realize how bad the situation would get. It’s much worse than I thought it would be, and ignoring market conditions today would only mean deeper cuts down the road.”

Ah, for happier times, such as in these three videos of Calacanis, which I shot when life was quite a bit sunnier.

The first two are of my visit to Mahalo’s Santa Monica, Calif., HQ last summer (tony digs and giant screens for all) and the third is the video from when Walt Mossberg and I demoed Mahalo at the fifth D: All Things Digital last year.

Now that the plot has inevitably thickened, it’s interesting that Mahalo means “thanks” or “gratitude” in Hawaiian. And BoomTown is surely thankful for the ongoing drama that Calacanis brings to the Web.

Here are the videos:

Visit to Mahalo:

Interview with Calacanis:

Mahalo Demo at D5:

Though I jokingly congratulated Calacanis on the investment from a “toddler VC,” because of the 33-year-old Botha’s freshly-scrubbed and youthful looks, I’d be pretty pleased if my two sons–2 and 5 years old–could be involved in a multibillion deal after only a few years on the job.

“You have to put yourself in a position to be lucky,” said the South African-born Botha over lunch at the Sundeck on Sand Hill Road in Silicon Valley recently.

Here’s a video I did of my visit with Botha, where I both incorrectly note the address of Sequoia and willfully refuse any effort at pronouncing his name with any grace:

Botha, who is the clear protege of Silicon Valley uber-VC Mike Moritz of Sequoia (of Yahoo and Google fame), seems to be awfully good at that, after scoring a big win for the firm when he turned a $12 million investment in YouTube into a $450 million windfall after the online video site was sold last year to Google for $1.65 billion.

Botha’s previous stint at PayPal (where he met the team that later put together YouTube), a job he got to earn money while at Stanford Business School, ended with him being CFO at the time of its 2002 IPO. It was soon sold for another $1.5 billion to eBay.

His background is actually more in math, with his first job as an actuary. Botha later became a consultant, before he came to Silicon Valley to get his MBA from Stanford.

While many mistakenly think he is related to former hard-line South African Prime Minister P.W. Botha, he actually is the grandson of a well-known former foreign minister Pik Botha, a liberal politician at a time of not-very-liberal policies related to apartheid.

He arrived at Sequoia after PayPal, although he noted that he had no experience in being a VC, and he has been intent on finding companies that “solve consumer problems.”

Currently, he is invested in another online video start-up, the high-profile Joost, as well as instant-messaging site Meebo and shoe and accessory online retailer Zappos.com.

He is also foraging around in the world of “bioinformatics,” which he thinks is a promising new arena marrying Web and medical technologies.