a16z-backed Entropy shuts down, promises investors refunds

Entropy, the cryptocurrency custody startup that raised $25 million from Andreessen Horowitz and other prominent venture capital firms, is shutting down operations after four years and will return remaining capital to investors, its founder announced on X.

Tux Pacific, the company’s founder and CEO, said that the decision followed several business pivots and two rounds of layoffs.

“After four hard years working in crypto, I decided that the best I could do has already been done: it was time to close up shop,” Pacific wrote, adding that the company had been working on a crypto automation platform similar to workflow tools like n8n and Zapier but with blockchain-specific features, including automated signing through threshold cryptography and artificial intelligence integrations.

Entropy went from custody solution to crypto automation

Entropy initially positioned itself as a decentralized alternative to centralized crypto custodians such as Fireblocks and Coinbase when it launched in 2021. 

Pacific, who identifies as transgender and has described themselves as an anarchist, founded the company after working at cryptography network NuCypher, where they developed expertise in advanced cryptographic techniques. 

The company raised $1.95 million in a pre-seed round in January 2022, followed by the $25 million seed round led by a16z in June 2022. Other investors included Coinbase Ventures, Robot Ventures, Dragonfly Capital, Ethereal Ventures, Variant and Inflection, as well as angel investors Naval Ravikant, Sabrina Hahn and James Prestwich.

At the time of its fundraising, Pacific, a self-taught cryptographer, reportedly stated that the company did not yet have a defined business model but was focused on building technology that would allow users to maintain control over their digital assets while benefiting from advanced cryptographic security.

However, the company appears to have struggled to find product-market fit as it pivoted to developing a crypto automation platform. 

After seeking feedback on this iteration, Pacific said it became clear the business model “wasn’t venture scale”, leaving a choice between finding “a creative way forward or pivot once more.”

What is Pacific’s next move?

In the same post that announced Entropy’s winding down, Pacific said they would be leaving the cryptocurrency industry entirely and moving into pharmaceutical research, specifically focusing on hormone delivery innovations for menopausal women and transgender women undergoing hormone replacement therapy.

“My time in crypto might be coming to an end, as I feel myself drawn specifically into pharmaceuticals,” Pacific wrote, noting plans to validate research on new estradiol drug formulations while studying biophysics and organic chemistry. Pacific wrote that “a career is a practice: the goal is not the destination, but the journey of innovation.”

Pacific thanked a16z and general partner Guy Wuollet for their support throughout the wind-down process, calling their guidance invaluable.

The decision to return capital is not a first in the startup world, but it is also uncommon. Some founders may seek more funds to try out more pivots, seek acquisition, or operate until all the funds dry up. 

However, raising funds in 2025 may have proven difficult, as data showed that most investors cut checks, both big and small, for mostly late-stage startups. Early-stage startups and those who had not gained enough traction or market fit were mostly overlooked.

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