Dry Powder

Category: finance

Cash reserves kept by a private equity or venture capital firm to be deployed for future investment opportunities.

Dry powder is the fund’s "ammunition." It is capital committed by Limited Partners (LPs) that the firm has not yet invested. Firms with high levels of dry powder are positioned to hunt for bargain acquisitions during market downturns, as they have the cash ready to deploy while competitors are liquidity-constrained.

Common Examples

• The fund is currently sitting on $500M of dry powder, waiting for the correct valuation entry point in the industrial data sector.
• Limited Partners demand that firms deploy their dry powder within a three-year window, or risk returning the capital without fees.