Signs that all is not well at Snapchat, a wunderkind among startups, could spell trouble for so-called "unicorns," young and privately-held companies with valuations of more than $1 billion.
Fidelity reportedly has written down by 25 percent the value of its stake in the photo messaging app, which has drawn nearly $1.2 billion in funding.
The news is the latest indication that the future is not necessarily bright for all unicorns.
In October, BlackRock, the world's largest asset manager, reportedly marked down the value of its investment in Dropbox by 24 percent. Last week, the online payments company Square set a pricing range of $11 to $13 per share for its initial public funding round, with the middle of that range marking a 22.4 percent discount to the $15.46 a share price set up last year.
Blood testing startup Theranos has faced criticism that its technology doesn't work as well as claimed. The FDA has raised questions and partnerships with drugstore chain Walgreens and grocery giant Safeway are reportedly on hold or on the brink of collapse.
For some tech startups, an ongoing loss of cash could spell the end, with a number of public warnings that many don't have the financial strength to survive. At the 2015 SXSW conference, Bill Gurley, who invests in Uber and Snapchat, said that there was a "complete absence of fear" in Silicon Valley and that the high rate at which many of these companies burn through cash threatens their survival.
Venture capitalist Marc Andreessen wrote more than a year ago that founders of new companies have only known a time when money was easy to raise at ever higher valuations, but that the environment would not last. Another VC, Fred Wilson, wrote: "We have multiple portfolio companies burning multiple millions of dollars a month. Thankfully it's not our entire portfolio. But it is more than I'd like and more than I'm personally comfortable with."
If unicorns go under, there are other potential ramifications beyond the financial hit to investors. Companies that opt to go public to keep running might not be embraced by Wall Street, which could chill the overall IPO market. Any contraction could put engineers, scientists, and designers out of work, pulling down wages for tech talent. And high-flying tech communities including Seattle and San Francisco could see declining demand for housing and office space, cooling real estate markets.
Still, investors continue to plow cash into startups. Freelance marketplace Fiverr just received another $60 million. Secure healthcare messaging company TigerText landed $50 million more and online course provider Udacity picked up a $105 million round.