2015 was an interesting year for the venture capital industry. A report from CB Insights showed that while there was a huge increase in global investments for the year, there was also a major drop in startup funding during the fourth quarter. There seems to be disagreement regarding exactly what this means for startup financing as we move into 2016. 

Venture capital investments in 2015 
According to the CB Insights report, global venture capital investments increased 44 percent between 2014 and 2015. Investments reached $128 billion in 2015, and the number of venture-backed companies that became unicorns increased from 43 in 2014 to 71 in 2015.

Despite this major overall growth, venture capital investment decreased dramatically between the third and fourth quarter, dropping from $38.7 billion to $27.2 billion. 

What this slowdown means
Unfortunately, there is no definitive explanation for why the huge drop in investments occurred, nor what it means for the future of venture capital investments. CB Insights suggested that a few causes of the slowdown could be the rise in U.S. interest rates (which will have ripple effects on the rest of the world), a possible slowdown in China and an overall erratic global economy.

Forbes explained that some venture capitalists believe the slowdown came about as a result of fewer later stage investments because venture capitalists have no longer been investing heavily in companies that are struggling to live up to their initial valuations. Some venture capitalists, like Joe Horowitz of Icon Ventures, think a slowdown could be a good thing because startups will no longer face the pressure of keeping up with irrationally high valuations. Others, such as Marc Andreessen of Andreessen Horowitz, don't believe the decline can really tell us anything. Andreessen explained to Forbes that quarter-to-quarter data is relatively meaningless to many venture capitalists.

We cannot know for sure whether venture capital activity will continue to slow in 2016, but venture capitalist Rick Yang, a general partner at New Enterprise Associates, told CNBC he predicts the biggest contenders for venture capital investment this year will be virtual reality, edtech and e-commerce companies. 

Arik Speier, co-leader of the KPMG Enterprise Innovative Startup Network and Head of Technology for KPMG Israel, explained in the CB Insights report that companies that want startup funding in 2016 will need to have explicit monetization plans for their products or services. Venture capitalists, he explained, are no longer interested in a company that does not yet know how it will make money. 

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