Q1 2026: Deployment, Market Conditions and Where MFV is Spending Time
Observations from the ground across digital assets, AI, and global markets
Q1 was an active quarter for us. We deployed $1.75m across two new seed investments: a team based in Greater China building the agentic operating system for the one-person company economy and a team based in the US building AI infrastructure for embedded systems. This note summarizes what we observed in the market and how it is shaping our activity.
Q1 Activity
We spent time with founders and allocators across the Bay Area, NYC, Boston, Austin, Tokyo, Hong Kong, Beijing, and Shenzhen, and continued deploying across our core areas of focus. Across our conversations, a consistent message emerged from many funds: they are not deploying at pace.
The reasons are not uniform, but they point in the same direction:
Public market volatility has made exit timelines harder to underwrite.
There is uncertainty around how AI will reshape software margins and where durable value will sit across the stack.
Hardware, robotics, and physical AI introduce longer feedback cycles and unclear capital intensity.
Internally, many firms are also managing pacing, reserve allocation, and DPI pressure from prior vintages.
Each factor is rational on its own, but together they have slowed decision-making.
Market Observations
What we observed was a split in the market. At the early stage, fewer processes are competitive and rounds are taking longer to come together. Founders are often engaging with a smaller set of investors, and pricing is more dependent on specific conviction than on broad momentum. In parallel, capital has concentrated into a narrow set of categories. AI infrastructure, agent-driven systems, and physical compute continue to absorb a disproportionate share of funding, while most other sectors see limited activity. Large funds are still writing large checks in these areas, but outside of them, many are effectively in observation mode.
This combination changes the structure of opportunity. When large pools of capital slow down, access improves for investors who are willing to engage early and underwrite independently. Fewer competitive processes mean a higher likelihood of building direct relationships with founders and shaping rounds rather than reacting to them. Entry prices become less anchored to recent comps and more to the specific risk and progress of each company. This environment rewards speed and clarity of thought, particularly at the seed and Series A stages.
The current environment allows for earlier access, less competitive processes, and more variability in pricing. Historically, these conditions have led to stronger entry points for early-stage investors, particularly when capital is concentrated and decision-making slows at larger firms.
Where We’re Spending Time
Our approach this year has been to remain active within digital assets, where the dislocation is more pronounced. The focus has been on market infrastructure, agent-driven financial systems, and applications that abstract complexity for end users. On the infrastructure side, we are spending time on primitives that improve how value moves onchain, including settlement, liquidity formation, and the coordination of capital across fragmented environments. We are also seeing early signs of agent participation in financial activity, which introduces new requirements around execution, pricing, and risk, effectively forming early agent economies onchain. At the application layer, the most relevant teams are building products that package these systems into something usable, whether for traders, developers, or mainstream users.
Alongside this, we are tracking adjacent shifts in AI infrastructure and systems that bridge software with the physical world. These areas increasingly intersect with digital assets, particularly as compute, coordination, and capital allocation become more programmatic. The common thread across both digital assets and these adjacent systems is exposure to real usage and capital flow, rather than isolated technical progress.
The founders operating in these areas tend to share a consistent profile. They iterate quickly, often with incomplete information, and are comfortable building in environments where there is no established playbook. Internally, we refer to this group as “Squirrley Operators.” The term is informal, but it captures a real pattern. These teams are building infrastructure that is used continuously, often by other systems, and their success is measured in performance rather than visibility.
In Q1, we continued deploying across these categories with a global sourcing approach. Being physically present across multiple ecosystems has been important for both access and filtering. Many of the most relevant teams are not running broad fundraising processes, and early engagement has been necessary to build conviction. Our check sizes and stage focus remain consistent with our strategy, but the environment has allowed for more direct access and, in some cases, more favorable entry points than would have been available in a more competitive market.
Outlook
Periods like this have historically favored investors who are willing to act while uncertainty is still high. The advantage does not come from predicting macro outcomes with precision, but from identifying where real work is happening and underwriting it before it becomes consensus. That is the position we are taking as we continue deploying through 2026.
We are continuing to deploy within these areas with a focus on early-stage opportunities where we have direct access and clear conviction. The market remains selective, but we are seeing consistent signals in specific segments, and we plan to stay active as the year progresses.
If you’re looking for an active partner operating in the above markets, please reach out – we are actively deploying.