I wrote a fair bit last year about the disconnect between how companies were being valued and the fundamentals of those businesses. It seemed to me that many companies, from the founders, to the leadership teams, and the rank and file employees got more focused on raising capital and valuations than the basics of a business (people, product, customers, revenues, profits, etc).

That is starting to shift. I can feel it. With the public markets bringing high flyers back to reality, you can now buy the best companies out there at multiples of earnings and profits that make some sense in a historical context. And we are seeing reports that many mutual funds and hedge funds are leaving the private markets because the values in the public markets are so compelling. All of this is healthy.

Vitalik Buterin, the founder of the Ethereum project, said this at ETH Denver this past week.

The winters are the time when a lot of those applications fall away and you can see which projects are actually long-term sustainable, like both in their models and in their teams and their people

Vitalik was talking about a “crypto winter” but the basic point is more broadly applicable.

Business models need to be sustainable. Teams need to stick together and ship things. The fundamentals need to be in place for a business to succeed. All the money in the world at eye-popping valuations won’t do that for you.

I have no idea if we are in for another crypto winter. I have no idea if the stock market will continue to go down. I have no idea if the slump in the public markets will seep into the private markets. All of those questions are above my pay grade.

What I do know is that the businesses that focus on the fundamentals will succeed in any market, up or down. And I do feel that there is more of that going on in 2022 than we saw in 2020 and 2021 and that’s a very good thing.