Cryptine Networks
The business, the turning points, and the decisions behind them.
01 / WHAT IT BUILT
What the company did
Cryptine Networks was a security software startup founded by Nathan Underwood. It began in early 2002 as a do-it-yourself IT security consulting firm - incorporated cheaply as a lifestyle business mainly for tax shielding and liability reduction. Andrew Fine joined in the summer of 2003, and after about a year the team realized many of the security services they delivered by hand could be automated with software; in December 2004 they brought on their first two software developers and began building the product. Over the next ten months the software effort took several twists but showed promise. In October 2005 they sold the consulting assets to Helio Solutions - a small seed investment that let the remaining team focus exclusively on software development - a restructuring that ultimately led to the company's failure several weeks later. Cryptine became a widely cited cautionary tale: co-founder Andrew Fine's public postmortem, 'Key Lessons From Cryptine Network's Failure', was praised by investor Brad Feld for its candid lessons about corporate structure, stock vesting, and founder equity disputes.
02 / Cryptine Networks FAILURE REASONS
Failure factors supported by the current evidence
Founder Andrew Fife’s 3 Jul 2006 post-mortem (weeks after shutdown; Brad Feld linked it the same month) states Cryptine failed after the Oct 2005 sale of consulting assets to Helio Solutions: remaining software team and departing founders deadlocked over equity redistribution needed to make the cap table venture-fundable; DIY incorporation left a board with no independent director who could break the deadlock, so they shut the company despite product/customer traction.
Fife: leaving vs remaining founders could not agree equity redistribution after the Helio sale; forced dilution was not available.
DIY incorporation produced no independent director; the board could not break the deadlock.
03 / EVENT HISTORY
Events in the structured record
- Bankruptcy
Fife 3 Jul 2006: 'Several weeks ago Cryptine Networks failed' and the board shut the company after the equity deadlock.
04 / CONTEMPORARY REBUILD ASSESSMENT
Difficulty of rebuilding this project today
Material for this section is being gathered and checked. It will appear here once ready.
Overall assessment: Not completed
05 / CAUSAL CHAIN
How the factors connect
- 01
Founded in early 2002 as an IT security consultancy by Nathan Underwood.
- 02
In December 2004 it brought in a software development team to pivot to automated security products; in October 2005 it sold its consulting assets to Helio Solutions to focus on software.
- 03
The restructuring triggered team and equity disputes, and the company failed in 2006; Andrew Fine published a public post-mortem of the failure.
- 04
No audited loss figure was publicly disclosed.