Venture capital investment globally had a rough time in 2016.
Completed financing declined by 24%, and funding fell to $127 billion from $141 billion in 2015, according to a report released Thursday by KPMG.
KPMG’s Q4 Venture Pulse noted that after a strong start to 2016, investor optimism quickly waned and purse strings tightened in the second half. Geopolitical upheavals—Brexit and the U.S. presidential election, in particular — added to market uncertainty.
“2016 was a reality check for the VC market,” Brian Hughes, national co-lead partner at KPMG’s venture capital practice in the U.S., said in a statement.
“Investors drew back considerably. They paused, re-evaluated and focused on their existing portfolios and gave greater scrutiny to deploying new money to both new and existing investments.”
Though deal activity plummeted in 2016, the total amount of VC fundraising across the globe remained robust. U.S. fundraising increased to $41.6 billion from $35.2 billion in 2015. In Europe, capital raised hit a seven-year high of $10.5 billion.
KPMG said signs indicated that last year’s downturn may be indicative of industry normalization following a period of overheating, rather than a slump in the industry.
The U.S. saw the largest portion of both VC deal activity and funding globally in the fourth quarter, even though U.S. round counts fell by 22.3% year over year.
Funding levels dropped by 12.8%, from $79.3 billion to $69.1 billion. The decline in U.S. deal activity was also substantial — from 10,468 deals in 2015 to 8,136, the lowest level since 2012.
In Asia, although the total number of deals plummeted, the total amount of venture capital invested remained steady year over year, the only region in which this was so, at around $39 billion.
However, the fourth quarter ended on a low note, with 24.7% less investment and 29% fewer deals than the same quarter last year.
Investment in China was up year over year, reaching a record $31 billion invested, despite a drop in the number of deals from 516 to just 300 between 2015 and 2016. India showed an almost opposite trend, with the number of deals remaining relatively high, while total venture capital invested dropped more than 50%, from $8.2 billion to $3.3 billion year over year.