Uh Oh, Unicorn Storm Clouds Ahead?

Can unicorns navigate storm clouds? Lightning? How about down rounds?

The FinTech sector was a center of sturm und drang this past week. You may have heard a little bit about Lending Club, the online lending, well, club that saw a mass exodus of investors in the wake of improprieties disclosed in loan sales. Peers, such as OnDeck, fell in sympathy. Once these online lenders were unicorns, now they are hobbled and pulling up short.

Similarly, Square. Loan growth is slowing, expenses are growing and, suddenly, the shape of things to come looks a little ominous.

So it is with our Unicorn Watch, which still shows average implied size at $2.9 billion — but that is a snapshot. Some of the bigger headlines that spanned the week — beyond those tied to the online lending segment — came from beyond U.S. shores, as, in China, home sharing site Tujia was widely reported to have surpassed Airbnb in terms of presence in China, in part by building out its own platform with a focus on Chinese travelers. The firm has raised as much as $350 million through the last 12 months and has garnered a unicorn valuation of roughly $1 billion.

Separately, Snapdeal, based in India and valued at $6.5 billion, has talks in place that would bring money into FreeCharge, with an eye on digital payments.

What are the clouds a-brewing? Some numbers coming out of Silicon Valley show that, of all new financings in the technology space, down rounds, where valuations are implied at levels lower than seen before, stood at 11 percent, which is a little lower than the fourth quarter tally of 12 percent. The data comes from Fenwick & West, a tech-focused law firm.

That’s a small downtick, and ideally, you’d want to see some real movement to the downside of down rounds in an environment where optimism is supposed to reign. But drilling a little deeper, Fenwick & West found that the biggest share of down rounds, in tech and software specifically, came for mature companies, as implied by financing rounds that came in rounds that were Series E or later.

These are firms that have been around for a bit, and one would think they have the clarity and relatively seasoned growth profiles that might even speak to profits, if not now, then somewhat sooner than some high-flying brethren. And if investors have been marking down their enthusiasm here, are high-flyers much behind? Internet and digital media firms are seeing down rounds creep up after a declining, and then flat, period though the past two years. In fact, this is the subsector that had seen, alone among peers, growth in down rounds.

Gather ye rosebuds while ye may and while the storm clouds gather, too.