In venture capital, dry powder refers to the capital that venture capital firms have raised but not yet deployed into investments. It represents the amount of money that is available for future investment opportunities, often held in reserve to ensure that the firm can capitalize on promising prospects as they arise. Although the term is used in venture capital, it is also used in the world of private equity investment.
For example, a private equity firm with $500 million in dry powder has plenty of capital committed by its limited partners but not yet deployed, allowing it to move quickly when an attractive acquisition target becomes available without needing to fundraise first.
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