Investment into venture capital (VC)-backed companies in the United States has slowed in back-to-back quarters, according to Venture Pulse, the quarterly global report on VC trends published jointly by KPMG International and CB Insights.

The U.S. saw only $14.8 billion invested in Q1’16, a slight increase (six percent) from Q4’15, while the number of actual deals declined, slipping an additional two percent from last quarter to 1,035 deals. These two quarters are a major slowdown from an otherwise record year for VC investment in FY15.

“Though we feel there is a considerable amount of dry powder in the market, overall concerns around the global economy and a decline in valuations are leading investors to be far more selective,” said Brian Hughes, National Co-Lead Partner, KPMG LLP’s Venture Capital Practice. “VC investors are looking for performance rather than possibility.”

According to the report, seed-stage investments fell to less than a quarter of all deals in Q1’16, dropping to a five-quarter low of 22 percent. Series A rounds actually outpaced seed deals for the quarter, reversing the trend of previous quarters.

Median early-stage deals in Q1’16 matched last quarter’s high of $3 million, up 50 percent from Q1’15. Meanwhile, according to the report, mean late-stage deal size in North America plunged to $21.5 million in Q1’16, down from $30 million in Q4’15, and $34 million in Q3’15.

“New companies looking for early-round investment need to re-evaluate their pitch,” said Conor Moore, National Co-Lead Partner, KPMG LLP’s Venture Capital Practice. “Focusing on the size of the market and potential revenue is no longer enough. Funding will likely depend on them having a clear vision of their road to profitability.”

Additional findings:

• The number of new Unicorn companies fell globally to five in Q1’16 - none of which were in the U.S.
• Mega-round investments ($100+ million) in North America remain depressed after falling off in Q4’15. Q1’16 saw only 18 mega-round ($100+ million) investments in North America.
• The 10 largest rounds in North America, including U.S.-based Uber, Snapchat, Jawbone, WeWork and others, totaled more than $3 billion for Q1’16.
• 60 percent of all VC investments in Q1’16 were made in either California, New York, or Massachusetts (up 5 percent from last quarter).

KPMG is a global network of professional firms providing Audit, Tax and Advisory services.

CB Insights is a National Science Foundation backed software-as-a-service company that uses data science, machine learning and predictive analytics to help our customers predict what’s next—their next investment, the next market they should attack, the next move of their competitor, their next customer, or the next company they should acquire.