I’ve anecdotally heard from many startup investors that the private markets will tend to lag the public markets a bit. So as public market valuations drop, so too (eventually) will the private markets.
If you look at some of the most successful startups of the past decade (Uber, Square, Stripe, Airbnb, Dropbox, many many more), many of them were founded in or around the global financial crisis in 2007-2008.
In my mind, it’s hard to say that the tough times were causal towards the success of those companies, since it was also likely due to the timing in terms of technology an mobile that enabled those businesses to thrive.
However, there probably is something to be said for the fact that when the markets get tough and start looking at profitability again, the weaker companies might not survive, and so it’s a “burning down of the forest” that leaves the strongest startups still standing (and perhaps also able to benefit from top talent that is let go from other weaker startups that are shut down).
Personally – there are so many factors that contribute to success, I try to mostly spread my investments evenly over time, in a dollar-cost-averaging type of style. It is good to be aware that valuations and metrics should adjust, and if liquidity dries up it could lead to more startups that aren’t able to raise rounds and might have to shut down. However, I think it could be said that the strong will (hopefully) survive, and then have even more talent and room to grow and succeed in the coming years.
KingsCrowd has some great charts that look at the markets and analyze trends:
Valuation/raise trends – https://kingscrowd.com/markets/