Dry powder

Definition

Money a fund has raised and not yet spent, available to bid today.

Why It Matters

When funds are flush with it, more bidders chase the same businesses and entry multiples drift up, so a searcher feels dry powder as tougher competition and higher asking prices. When it is scarce the field thins and patient buyers get better entries, which is part of why timing and persistence pay as much as the model does.

In numbers: A fund that raised $50M and has deployed $35M holds $15M of dry powder, which is the only figure that says whether it can bid on the business in front of it.