Jim Armitage: This unicorn fell at first fence but now looks worth a punt

Unicorn businesses — start-ups whose value has shot through £1 billion — are rare.

The clue’s in the name.

Unicorns that are London born and bred are scarcer still.

Which is why, instinctively, one wants Funding Circle to succeed.

A business bred from clever tech, it fulfils a need being neglected by the big incumbent banks which have retrenched from lending on affordable terms to small businesses.

The problem is, its cheerleaders got carried away with the hype, floating it on the stock market last October at a horribly exaggerated price.

That was largely based on the company’s forecasts for spectacular lending growth. Promises of 40% expansion a year looked brave even in the most benign economic environments.

But with Brexit still unresolved, the rashness of the target was exposed. Small firms don’t risk taking on new debts when they’re not confident about the outlook. Well, not the responsible ones you want to be lending to.

Investors figured this out long ago — steering clear of the shares. Today, management got real and slashed their growth forecasts in half.

While this has all felt horrible for shareholders now down 70% on last October’s float, the stock is now beginning to look reasonably priced for new investors.

Even on a grim day like today, there are reassuring signals; Funding Circle is not suffering a flood of bad debts (always a worry with a new type of lender). It is tightening lending criteria rather than being tempted to take on riskier clients to boost volumes.

Funding Circle is a long-term bet on a UK champion with global growth plans.

Like Aston Martin, a similarly overpriced IPO that fell to earth, if you can handle the risk, it is now worth a punt.