(Bloomberg) -- Investors should brace for a historic drop in the stock market to start filtering through to startups over the next few quarters, said Sapphire Ventures partner Cathy Gao.

“We are going to be in for some hard times ahead -- I don’t know if it’s going to be one quarter, two quarters, three quarters or more,” Gao said in an interview Friday with Bloomberg Television. “My message to everyone is this is an opportunity to look inwards, get your house in shape and be ready for the future.”

The S&P 500 posted its worst first half in 52 years, driven by high inflation and growing recession fears. Private-market firms were spared the pain of the rout, but that’s about to change starting with “very late-stage companies,” Gao said, citing the fintech business Klarna Bank AB and Instacart Inc., a grocery-delivery startup, as examples.

After that, the affected businesses will range from second-funding-round startups to ones preparing for an initial public offering, she said. Those are the types of companies that Gao specializes in.

Sapphire, whose investments have included Fitbit and 23andMe, has more than $10 billion under management. 

“My stage is a little bit frozen right now because, on one hand, a lot of companies raised a lot of money in 2021 -- they might have 30 months of runway,” Gao said. “On the other hand, investors don’t know where the valuation is going to settle quite just yet.” 

There’s an opportunity for companies to reassess “what they are actually worth and prepare themselves for future rounds they may have to raise,” she said.

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