The concept of Dry Powder SIMPLIFIED..

I see a lot of talk around ‘Dry Powder’, and I decided to pen this article to simplify the concept & share some thoughts around this topic

Before I begin, let us understand what is ‘Dry Power’?

In very simple terms a VC Firm has raised cash from their LP’s but has not yet deployed it and this very cash (cash in hand) is referred to Dry Powder

Quantum of ‘Dry Powder’

There are different numbers floating around & after deep research of many articles across publications I have decided to take a shot & state that the amount of Dry Powder with VC’s globally is USD 290 Billion

VC’s make 2 types of Investments:

1.?????Fresh Investments – This is made into new start-ups & ventures

2.?????Follow On Investments – This is money that a VC shall invest in start-ups in which they have already invested. Eg – A VC might have invested in a start-up at Seed and Pre-Series A and shall now follow it up by investing in that very start-up as it is expanding by way of participating / leading the round in Series-A

Coming back to USD 290 Billion around 55% is set aside for fresh investments & the rest for follow up investments, thus

1.?????Dry Powder waiting in the wings to be deployed as Fresh Investments – USD 165?

2.?????Dry Powder waiting in the wings to be deployed as Follow On Investments – USD 125

So, what caused this mega build-up of Dry Powder?

As we are all in the know, over the last few quarters there has been a build-up of uncertainties of varied nature globally, and this slowed down investments by VC Firms

What Next?

As LP’s & Investors with Big Bucks build pressure on VC Firms to deploy, VC Firms shall soon have to deploy and begin to adjust expectations keeping the situation in mind

One of the biggest advantages that works in favor of Dry Powder is that in many cases the valuations are a lot more eased and start-ups that made it during this phase deserve their share of glory and of course funds..

The flood gates shall be opening soon and as they say ‘May the Best Man / Woman Win’

Whether you are a start-up, start-up founder or a VC Firm we wish you luck

At Stallions Capital we stay committed to our set of start-ups, our VC Firms and to the MENA Region

If you are a start-up from the MENA region looking to raise Funds OR a VC Firm looking to deploy funds in the best-in-class start-ups then drop me a line at?[email protected]