Global venture capital (VC) investment saw a slight increase in the second quarter of 2016 (Q2), but that was thanks mainly to massive investments in a select group of established companies, according to a joint report produced by Amsterdam-based global advisory firm KPMG International and New York-based analytics company CB Insights released on Tuesday.

Global VC investment edged up by 3% to US$24.7 billion across 1,886 deals, a decline from the 2,008 deals in the first quarter (Q1) of 2016. In fact, the slight jump in funding is largely due to investments of more than US$1 billion in well-known startups, such as San Francisco-based ride-sharing service Uber Technologies Inc. and Venice, Calif.-based Snapchat Inc., a social media network, according to the Venture Pulse report.

“The story of this quarter is the continued decline in deal activity. Unless you’re one of five companies for which there is insatiable investor appetite, it is becoming tougher to raise money from VCs,” says Anand Sanwal, CEO of CB Insights, in a statement. “Expect to see lots of companies talking about profitability and taking on cost-cutting measures in the coming quarters.”

The study suggests that VC investors are nervous because of economic uncertainties surrounding geopolitical events such as the U.K.’s decision to leave the European Union (known as “Brexit”) and the upcoming federal election in the U.S., which is why many investors are focusing on companies that are already valued at more than $10 billion.

On a regional basis, VC investing in North America was up to US$17.1 billion in Q2 from US$15.5 billion in Q1, but the volume of deals fell to 1,117, which is 8% lower than the number of deals in Q1.

VC investment activity in Canada accounted for US$449 million of the North American total, an increase from US$343 million in Q1. The number of deals over the first two quarters of the year remained steady at 65. The biggest Canadian deals saw US$100 million for Montreal-based DalCor Pharmaceuticals, a health-care company, and US$61 million for Toronto-based Flipp Corp., which produces a mobile application for retail flyers.

Asia also saw increased funding across a declining number of deals in Q2 as there was a total of $7.4 billion invested from 343 deals in Q2 vs $7.2 billion from 389 deals in Q1.

Europe was the only region among major markets to see the number of deals grow, with 385 deals in Q2 from 365 deals in Q1 but it also suffered the biggest funding drop. VC investment was at US$2.8 billion in Q2 2016 from US$3.5 billion in Q1. The primary cause of this decline is attributed to the plunge in VC investment in the U.K.

“Brexit has the potential to disrupt the disruptors,” says Jonathan Lavender, principal and head of markets for KPMG in Israel, in the report. “Concerns over key factors, including challenges around the free movement of labour and availability of capital, seem to have taken their toll on venture capital investment.”

Technology companies continue to be the main beneficiaries of VC investments as they accounted for 79% of VC investments in Q2 while health-care companies accounted for 11% and all other sectors accounted for 10%.

VC investments in companies working in the area of artificial intelligence (AI) are expected to maintain their growth trajectory over the next year. Investments in this area rose to $624 million in Q2 from $576 million in Q1 2016 and $373 million in Q2 2015.

“The relative resilience of this industry can be attributed to the fact that AI technologies underpin countless innovations, from driverless cars to robo-advisory platforms,” the report states.

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