This article:

  • Explores the surge of dry powder in European VC, analyzing 2024 trends.
  • Identifies challenges and opportunities within the dry powder landscape.
  • Offers strategic guidance on optimizing unallocated capital for maximum VC returns.

Imagine €410 billion waiting to be unleashed into Europe’s most innovative startups. That’s the staggering amount of dry powder European VCs are sitting on in 2024. But here’s the million-euro question: How will this capital reshape the startup landscape?

Let’s break it down:

What is Dry Powder, and Why Should You Care?

„Dry powder“ isn’t just a trending VC term – it’s the fuel that could ignite the next unicorn.

Dry powder refers to the unallocated capital VCs have raised, but have not invested yet.

In 2023, Europe’s VCs were holding a record €410 billion of it. This surplus isn’t just from recent fundraising; it’s a result of cautious investing in an uncertain market. VCs raised big in 2021 and 2022, but when the economy shifted, they pumped the brakes on deploying capital.

Private equity and venture capital dry powder reached a record €410 billion in 2023, equating to 86% of the investment total of the past four years.

in 2023, Buyout firms' dry powder rose to €284 billion, while venture capital and growth capital levels of dry powder increased modestly to €53 billion and €43 billion respectively.

3 Trends in Capital Deployment You Can’t Ignore in 2024

  • 1
    Record-Breaking Dry Powder: €53 billion for venture capital and €43 billion for growth capital. That’s a lot of zeros waiting to back the next big thing.
  • 2
    Cautious Optimism: Despite the abundance of dry powder, VC investors are exercising caution in deploying capital due to market uncertainties and limited exit opportunities – ready to pounce, but carefully choosing their moment.
  • 3
    Sector Spotlight: Keep your eyes on cleantech, AI, and health tech. The surplus capital provides a strong capacity to back innovative companies focused on competitiveness and sustainability.

Can Surplus Dry Powder Be a Risk?

Here’s why:

  • Increased Competition for Deals: More money chasing fewer deals? That’s a recipe for sky-high valuations for a stake in high-potential ventures.
  • Pressure to Invest: When you’re sitting on a mountain of cash, the temptation to spend it can lead to hasty decisions.
  • Potential for More Patient Capital: With ample reserves, VCs can afford to take a more patient approach, allowing startups longer runways to achieve their milestones without the pressure of immediate returns.

Media Contact

Rhea Colaso

VP of Experience, ACE Alternative

Email: rhea.colaso@ace-alternatives.com