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June 14, 2026
The Dispatch

Definition

Dry Powder

Dry powder is the committed but not-yet-invested capital available to a fund for new deals.

Dry powder is the difference between a fund's total committed capital and what it has already deployed; it is the ammunition available to make fresh investments or follow-on rounds. Large industry-wide dry powder indicates competitive bidding and potentially higher valuations, while low dry powder can mean a funding crunch.

Funds track dry powder to ensure they can support their portfolio companies and seize new opportunities through their investment period. PE and VC commentary often cites aggregate dry powder as a gauge of how much capital is chasing deals.

Related terms

  • Paid-In CapitalPaid-in capital is the amount of committed capital that LPs have actually transferred to a fund through capital calls.
  • General Partner (GP)A general partner is the fund manager that raises a private fund, makes the investment decisions and earns mainly through carried interest.
  • Capital CallA capital call, or drawdown, is the fund manager's formal request that investors transfer a portion of their previously committed capital so the fund can make an investment or pay expenses.

Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.