Dry Powder

Dry powder refers to the capital a venture fund has already raised from Limited Partners but has not yet deployed into portfolio companies, sitting available for new investments or follow-on rounds. Industry trackers publish aggregate dry powder figures to gauge how much unspent capital is waiting to be invested across a market at a given time.

Why does dry powder matter for founders?

A large pool of dry powder in a market segment tends to push valuations up, since more funds are competing to deploy capital into a limited number of attractive deals. Conversely, when dry powder shrinks, as it did across much of the venture industry in 2022 and 2023, term sheets get more founder-unfriendly and round sizes shrink, since GPs have less uninvested capital left to commit before their fund's investment period closes.