Evidence from 2022–2025 shows that publicly traded small- and mid-cap companies without clear paths to profitability were indeed heavily repriced and left at depressed valuations, consistent with Friedberg’s prediction.

• Unprofitable tech and SaaS were crushed starting in 2022. During the 2022 growth-stock rout, the Goldman Sachs Non‑Profitable Technology Index fell nearly 70% from its peak to the end of August 2022, far worse than the broader market, as investors fled high-growth, money‑losing tech names. (alliancebernstein.com) Cloud/SaaS names saw a similar reset: the BVP Nasdaq Emerging Cloud Index’s EV/sales multiple dropped from ~15.2× in November 2021 to 4.7× by November 2022, a ~70% compression, driven by higher rates and risk-off sentiment. (nasdaq.com) A separate Nasdaq/WisdomTree analysis noted these cloud valuations fell from 12–14× EV/sales in 2020–21 to roughly 4–5× as the Fed tightened policy. (nasdaq.com)

• Across the market, unprofitable firms badly lagged profitable ones. An analysis of all NYSE and Nasdaq companies over the past five years found that unprofitable firms returned a median ~4.2% annualized versus 16% for profitable companies, with much higher volatility and greater sensitivity to Fed rate hikes (loss-makers dropped about 2.2% on average in the 30 days after each hike, vs. 0.8% for profitable peers). (wealthprofessional.ca) This is precisely the pattern of “stocks being punished” for lacking earnings and cash‑generation.

• Small- and mid-cap indices with many unprofitable names remain discounted. Since the end of 2020, the Russell 2000 (U.S. small caps, many unprofitable) has returned only about 4% annualized and trades around 16× forward earnings—roughly a 30% valuation discount to the large‑cap Russell 1000, a gap that has persisted since 2022. Over one‑third of Russell 2000 constituents were still unprofitable as of mid‑2025. (reuters.com) Recent commentary notes that, even after a 2025 rebound led by unprofitable small caps, small-cap valuations adjusted for losses are still near 25‑year lows. (investopedia.com)

• SaaS revenue multiples have structurally reset lower. A 2023 SaaS valuation study shows U.S. SaaS revenue multiples down about 68% from their December 2021 peak (18.34×) to 5.84× by Q3 2023, underscoring how public cloud/SaaS companies—many of them small or mid cap and not yet profitable—have been repriced to far lower levels. (vestbee.com)

Taken together, from 2022 through at least late 2025, unprofitable or cash‑burning small- and mid-cap companies across tech/SaaS and other sectors saw sharp price declines, major multiple compression, and, in aggregate, persistently depressed valuations relative to both their own 2021 levels and to profitable peers. That matches Friedberg’s forecast that those unable to show a credible path to positive earnings and cash generation would “end up in the shitter,” so the prediction is best classified as right.