a16z-Backed Crypto Custody Startup Announces Shutdown – Investor Funds to Be Returned
Another crypto custody play folds—this time with a notable backer in the mix.
The Backstory
Venture capital giant Andreessen Horowitz (a16z) placed a bet on a digital asset safekeeping firm. The vision was clear: provide institutional-grade security for crypto holdings. The market, however, had other plans.
Why the Shutdown?
Regulatory hurdles piled up, making the path to profitability longer and more expensive than projected. Customer acquisition costs soared while revenue targets slipped—a classic startup squeeze. The leadership team faced a stark choice: burn through more capital chasing a shifting market or return what's left to investors.
The Fallout
Investors get their money back—a rare outcome in the 'fail fast' world of tech startups, though likely without the promised moonshot returns. The move highlights the brutal economics of building infrastructure in crypto: sometimes, even the smartest money can't outrun the costs of compliance and a crowded field.
The Bigger Picture
This isn't just one startup's story. It's a sign of the sector's painful maturation. The low-hanging fruit is gone. Building a sustainable business now requires more than just a crypto label—it demands real unit economics, which, as any traditional finance suit will smugly tell you, tends to be the part Silicon Valley forgets until it's too late.
The crypto custody space marches on, but the road is littered with ambitious ideas that couldn't quite crack the code. For every winner, there are a dozen quiet shutdowns—most without the courtesy of returning the cash.
Crypto Automation Bet Fell Short After Investor Feedback
The shutdown follows a late-stage push in 2025 to reposition the company around a crypto automations platform, which Pacific described as “basically n8n/zapier/etc for crypto,” with automated signing via threshold cryptography, secure computation using trusted execution environments, and “deep AI integrations.”
I am winding-up Entropy.
After four years, several pivots, and two rounds of layoffs, I’ve decided to wind-up Entropy and return capital to our investors.
For the latter half of 2025, the Entropy team was hard at work on a crypto automations platform (basically n8n/zapier/etc…
That product direction still failed to clear a venture-style growth bar. “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 wrote.
Entropy first drew attention in 2022 when it raised $25M in a seed round led by a16z crypto, with participation including Dragonfly Capital, Coinbase Ventures, Robot Ventures, Ethereal Ventures, Variant and Inflection. The company had earlier raised a $1.95M pre-seed round.
Founder Looks Beyond Digital Assets Toward Pharmaceuticals Research
At launch, Entropy pitched itself as a decentralized alternative to custody providers such as Fireblocks and Coinbase, leaning on cryptographic approaches like multi-party computation to let users control how funds could move, including rule-based constraints.
Pacific also thanked a16z crypto and Guy Wuollet for helping steer the wind-down, calling their guidance “invaluable.”
The closure lands in a tougher funding climate for early-stage crypto startups. Crypto venture deal count fell about 60% year-on-year in 2025, dropping to roughly 1,200 transactions from more than 2,900 in 2024.
Next, Pacific said they plan to step back before deciding what comes after Entropy. “My time in crypto might be coming to an end, as I feel myself drawn specifically into pharmaceuticals,” they wrote, adding they want to work on hormone delivery and validate research on new estradiol drug formulations.
