Q4 saw US$27.2 billion invested across 1,742 deals globally marking a 30 percent drop off in funding, and the lowest quarterly deal activity since Q1 2013.

According to the new Venture Pulse Q4'15 report, 2015 saw $128.5 billion invested into VC-backed companies, a 44 percent jump compared to 2014, and a record year for VC-backed investment. The past year also saw a 156 percent jump compared to all of 2013, which totaled $50.2 billion invested.

"2015 was a record-setting year for VC investment, driven by an incredibly positive first three quarters," said Brian Hughes , National Co-Lead Partner, KPMG Venture Capital Practice, KPMG in the US. "Following a pullback in the last quarter, we expect investors will be looking for companies that have their operations under control, reasonable burn rates, and strong plans for early stage profitability."

Anand Sanwal , CEO of CB Insights, commented: "Sentiment and the outlook became very negative towards the latter part of Q3 which suggested we would see a slowdown. But we were surprised to see the pullback manifest itself so quickly - just one quarter later. This slowdown was not just for VC-backed companies at the late stages; while the Unicorns get a lot of attention, Q4's data shows that it became harder for early-stage companies to raise money as well."

Key Q4 highlights:

Q4 deal activity saw a steep decline as globally VC-backed companies saw just 1,742 deals, the lowest quarterly total since Q1'13.
Asia , in particular, showed a significant slowdown on a funding basis, falling 32 percent to $9.7 billion on 346 deals versus Q3'15. North America also slowed as funding fell 32 percent to $14.1 billion on just 1,026 deals versus Q3'15. Europe did not see the same slowdown, as funding fell just 11 percent from Q3 to Q4, with VC-backed startups raising $3 billion on 338 deals.
The median size of late-stage deals in the quarter globally was $31.3 million - a substantial increase from the $18.3 million median observed in Q4'14.
The number of new Unicorn companies fell to 12, the lowest level of new Unicorn births since Q2'14. The previous three quarters in 2015 combined saw 60 new Unicorns.
Mega-rounds ($100 million+ financings) dwindled with just 38 deals made in Q4, versus 72 in Q3'15. A slew of mutual fund write-downs as well as investor concerns over an overheated late-stage market drove the slowdown in both North America and Asia .

North America sees slowed funding and deal activity
Lower deal activity seen in the third quarter dropped drastically in Q4'15, as North American VC-backed investment activity slowed to just 1,026 deals, the lowest quarterly total since Q4'11. Seed activity continued to falter, taking just 25 percent of all deals in Q4'15 resulting in a five-quarter low, a solid indicator that the decline in activity is not just at the late stages.

On the funding front, the large late-stage rounds that were so prevalent in the first three quarters of 2015 were largely absent in Q4'15. The lack of large rounds was evident in the funding numbers, as funding fell to $14.1 billion in Q4, the lowest quarterly total since Q3'14, and down 32 percent versus Q3'15.

Mega-rounds decrease driven by multiple concerns
Large mega-round deals (those over $100 million ) gained steam in the first three quarters, culminating in 72 such deals raising a combined $20.3 billion in Q3'15. However, after poor IPO performances for VC-backed tech companies, mutual fund write-downs of still-private VC-backed companies, and macroeconomic concerns, mega-rounds slowed drastically in Q4 to just 38 deals, totaling $11.7 billion .

North American companies saw 18 mega-round deals in Q4, close to half of the 39 deals in Q3, while Asian startups saw just 16, versus 27 in Q3. Comparatively, Europe only had 4 mega-rounds, down slightly from the 6 in Q3.

Asia funding craters, UK continues to lead Europe
Asian startups had a break-out year for investment activity in 2015, raising a total of $39.7 billion (more than the previous four years combined) on 1,442 deals. China and India drove the bulk of the funding, with Chinese VC-backed startups raising over $27 billion in 2015. Despite the multi-year funding highs, deals in China dropped 39 percent and funding fell 29 percent, respectively, from Q3 to Q4'15 as turmoil in public markets and concerns about macroeconomic growth may have curtailed more sizable investments in Chinese startups.

While the slowdown in activity was global, European startups fared better than their North American and Asian counterparts. While funding totals fell slightly from $3.5 billion in Q3'15, Q4'15 marked another strong quarter for VC-backed companies in Europe with just under $3 billion invested across 338 deals. Deal activity maintained strength, topping 300 for 12 of the last 13 quarters.

UK startups specifically boomed in Q4'15, raising $1.3 billion on 113 deals, up 112 percent and 19 percent, respectively, versus the same quarter in the prior year. Mega-rounds to O3b Networks and Deliveroo helped buoy the funding totals.

According to CB Insights' Mr. Sanwal: " Europe was one of the bright spots this past quarter. Overall, it has not participated in the mega-financing and Unicorn boom to-date like other venture hubs. Longer-term, the glass half-full view of Europe is that it may be insulated in a slowdown because it's not been as 'reckless' as its Asian and North American peers. Conversely, given venture capital's power law (1 or 2 winners are larger than all the rest), the glass half-empty view is that Europe has been too cautious in this latest boom and will miss out on tomorrow's big winners. This debate will likely intensify over the coming quarters."

Unicorn birthrate drops top 12 in Q4
2015 may well be remembered as the year of the Unicorn, with 60 new $1 billion valuation VC-backed companies born in the first three quarters of the year. However, after the surge in the first three quarters, only 12 new Unicorns were delivered in Q4'15, 7 of which were in North America and 5 in Asia . Among Q4's new Unicorns were Jet.com, Udacity, and Gusto.

Corporate investing remains strong
Robust corporate investment into VC-backed companies continued in Q4, with corporate VC participation reaching 25 percent for the third straight quarter. Asia saw the heaviest corporate involvement - with 35 percent of deals involving large companies, a five-quarter high. While also significant, North America and Europe had less corporate VC involvement by comparison - at 23 percent each.

"Looking ahead into 2016, we anticipate that the uncertain global economy, a projected slowdown in China , and the prospect of further interest rate increases in the US will lead to continued cautiousness by VC investors and a likely resurgence of IPOs and M&A activity around the world," said Arik Speier , Head of Technology, KPMG Somekh Chaikin in Israel .