Overhang
Also known as Capital Overhang, Dry Powder, Uncalled Capital, Undeployed Capital
Overhang is committed capital that LPs have promised to a fund but the GP has not yet called or invested. At the industry level it is the aggregate pool of uninvested commitments sitting at venture funds, often reported as dry powder. US VC dry powder hit roughly $311.6 billion at year-end 2023 per the NVCA Yearbook.
Formula
Overhang = Committed Capital - Called Capital- Committed Capital
- Total LP commitments to the fund
- Called Capital
- Capital the GP has drawn down via capital calls
In depth
Overhang has two scales. At the fund level it is the gap between what LPs committed and what the GP has called. At the industry level it is the aggregate of that gap across all active funds, which is what NVCA, PitchBook, and Preqin report when they talk about dry powder.
Both are forward-looking signals. Fund-level overhang at year three tells you how aggressively the GP plans to deploy in the remaining investment period. Industry overhang tells you the price pressure new entrants will face when they try to win deals. Both numbers can be high for the same structural reason: capital was raised faster than it could be put to work in good companies at acceptable valuations.
The vintage breakdown matters. A $200B overhang concentrated in 2022 and 2023 vintages is more concerning than the same dollar amount spread across vintages 2019 through 2024, because young vintages still have years left to deploy. Old vintages with stuck capital usually return it via reductions in commitment.
Why it matters
For LPs, overhang is a pacing input. If the GP is undeployed and the investment period is ending, the LP needs to budget for a sprint of capital calls in the final twelve months. For founders, industry overhang is the reason term sheets stay aggressive in down markets: GPs with mature funds still need to deploy.
For GPs trying to raise the next fund, high overhang at peers is a competitive threat. LPs underwrite the new fund against the question "are existing managers going to deploy responsibly given how much undeployed capital is already in the system?" GPs answer with deployment cadence charts and discipline narratives.
Worked example
A $400M fund at year three:
Committed capital = $400M
Called capital = $260M
Fund-level overhang = $400M - $260M = $140M (35% of fund)
That $140M needs to deploy across the remaining two years of the investment period. If the GP's average check is $8M, the math is 17 to 18 more new investments or follow-ons, which sets the deployment pace.
At the industry scale, dividing aggregate US VC dry powder ($307.8B at year-end 2024) by annual US VC deal value ($215.4B in 2024) implies roughly 1.4 years of forward deal supply sitting at funds. That ratio is the cleanest read on whether the industry is over- or under-capitalized at a given moment.
Frequently asked
Is overhang the same as dry powder?
Effectively yes at the industry level. Dry powder is the colloquial term used in NVCA and PitchBook reporting for aggregate uninvested commitments across venture funds. At the single-fund level, GPs usually call the same quantity 'uncalled capital' or 'unfunded commitments'.
How big is venture overhang right now?
The 2025 NVCA Yearbook reported $307.8 billion in US VC dry powder at year-end 2024, just off the $311.6 billion record set at year-end 2023. The 2022 vintage carries the largest share of the total per Preqin's vintage breakdown.
Why does industry-wide overhang matter for GPs?
High aggregate overhang means more capital chasing the same deals. It compresses entry returns by pushing up valuations, particularly at Series B and growth stages where the funds with the largest unspent commitments concentrate. The effect on seed pricing is weaker because seed checks come from smaller funds.
When is high overhang bad for LPs?
When GPs feel pressure to deploy before the investment period ends and lower their bar to do so. LPs track deployment pace against pacing models and ask hard questions when a GP is half-deployed at year four with most of the fund's quality bar still in front of them.
Does overhang sit in cash?
No. Overhang is a promise, not cash. LPs keep their unfunded commitments in their own portfolios and meet capital calls when the GP issues them, usually with ten business days' notice.