Dry Powder
Committed Capital Waiting to Deploy
Definition
Dry powder refers to capital that has been committed by limited partners (LPs) to a venture capital fund but hasn't yet been invested in portfolio companies. It's "dry" because it's ready to "ignite" when the right investment opportunity arises.
In Simple Terms
Think of dry powder as an empty gas tank that's been filled but not used yet. VCs have raised $100M from LPs, have deployed $50M, so they have $50M of "dry powder" left to invest.
Why It Matters
Dry powder levels indicate market capacity and competition. High dry powder means VCs have lots of money to deploy, increasing competition for deals and potentially driving up valuations. Tracking dry powder helps understand funding climate.
Example
Sequoia has $2B in dry powder for seed and Series A deals. This means they're actively looking for deals and will likely pay premium valuations to win competitive rounds.