Dry Powder
The amount of committed but uninvested capital a VC fund has available to deploy.
Definition
Dry powder is the amount of capital that has been committed by LPs but not yet invested by the GP. It represents the fund's remaining capacity to make new investments and follow-on investments. High industry-wide dry powder suggests strong VC investment activity ahead; low dry powder may mean fewer deals and potentially lower valuations for startups seeking funding.
Why it matters
When VCs have lots of dry powder, they are more likely to invest aggressively and offer higher valuations. When dry powder is low or LPs are pulling back, the fundraising environment tightens, potentially affecting your company's ability to raise and your equity's trajectory.
Example
A $300M VC fund has invested $180M across 20 companies over 3 years. It has $120M in dry powder remaining for new investments and follow-ons. The GP plans to deploy this over the next 2 years.