Trade uncertainty: Explore resources and tools for your business.

Trade uncertainty: Explore resources and tools for your business.

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Definition

Dry powder

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.
Published April 04, 2025

The term “dry powder” comes from the era of early firearms when soldiers needed to keep gunpowder ready, and dry, for use in battle. In venture capital, it metaphorically refers to capital reserves kept ready for quick deployment into investment opportunities.

While cash is the most straightforward and common form of dry powder, this capital can also be held in the form of other liquid or near-liquid assets, such as money market funds or treasury bills.

As an example, imagine that the venture capital Fund ABC, which has a total capital of $100 million, already invested $80 million in various start-ups. This leaves $20 million in dry powder, available for future investments or follow-on funding.

Historically, according to Canada's Venture Capital Landscape 2024 report, 55% of Canadian investors’ dry powder is deployed in Canadian companies (excluding management fees). Conversely, it is estimated that the U.S. allocates on average 2% of its dry powder to Canadian companies.

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