Entropy, a16z-Backed Crypto Custody Startup to Shut Down, Return Investor Funds

Entropy, a crypto custody startup supported by venture capital firm Andreessen Horowitz (a16z), has announced it will be shutting down its operations and returning funds to investors. Founder Tux Pacific shared this decision via social media after evaluating the company's trajectory over the past four years.

Key Takeaways

Entropy is winding down and will return remaining funds to its investors.
The startup attempted to pivot towards a crypto automation platform but could not achieve venture-scale growth.
Entropy had previously raised significant funding, including $25 million in a 2022 seed round led by a16z.
The crypto investment landscape is challenging, with a drastic drop in venture deals in 2025.
Tux Pacific plans to transition into pharmaceuticals research following the closure of Entropy.

The Decline of Entropy and Plans for Return

Entropy, the decentralized crypto custody startup that gained backing from Andreessen Horowitz (a16z), is preparing to close its doors and refund its investors, as revealed by founder Tux Pacific. In a recent post on X, Pacific stated, “I am winding up Entropy.” He expressed, “After four years, several pivots, and two rounds of layoffs, I’ve decided to wind up Entropy and return capital to our investors.”

Crypto Automation Efforts Didn’t Meet Expectations

The decision to shut down comes after a significant attempt in 2025 to shift the company’s focus to a crypto automation platform. Pacific compared it to well-known automation tools like n8n and Zapier, featuring automated signing through threshold cryptography and secure calculations using trusted execution environments, along with advanced AI integrations. Despite this initiative, the startup fell short of meeting venture capital growth expectations. “After an initial feedback request revealed that the business model wasn’t venture scale, I was left with the choice to find a creative way forward or pivot once more,” Pacific explained.

Entropy gained considerable attention in 2022 when it successfully raised $25 million in a seed round led by a16z, alongside investments from notable firms such as Dragonfly Capital, Coinbase Ventures, and others. Earlier, the company had also completed a $1.95 million pre-seed round.

Future Plans in Pharmaceuticals

When Entropy launched, it aimed to provide a decentralized alternative to established custody solutions like Fireblocks and Coinbase, offering users control over their funds through cryptographic methods, including multi-party computation to enforce specific rules on fund movement.

Pacific expressed gratitude towards a16z crypto and team member Guy Wuollet for their invaluable support during this transition.

The closure of Entropy reflects the current challenging environment for early-stage crypto ventures, as crypto funding deals saw roughly a 60% decrease year-on-year in 2025, plummeting to about 1,200 transactions compared to over 2,900 in the previous year.

As for his next steps, Pacific indicated a desire to take time before determining his future path. “My time in crypto might be coming to an end, as I feel myself drawn specifically into pharmaceuticals,” he shared, noting his interest in hormone delivery and researching new estradiol drug formulations.