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BitTorrent Funding Reduced to Bits?

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In a letter to shareholders, BitTorrent has announced that the $17 million in venture funding the company raised back in September has been greatly reduced, according to a report in TechCrunch. Evidently DAG Ventures, which led that latest round, was unhappy with what it was seeing. From that letter:

In late May and June of this past summer we closed a $17 million Series C financing.
The lead investor in this financing was DAG Ventures. Given the changes in our Company’s business model and projections that occurred in close proximity to the Series C financing, DAG claimed that the Series C financing should be substantially renegotiated. After evaluating DAG’s claim, engaging in significant negotiations with DAG, unsuccessfully trying to raise funds from other sources, and taking into account the overall economy, the Company decided to work with DAG to significantly modify the terms of the Series C financing.

The $17 million has been ratcheted back to $7 million and the pre-money valuation of the company was reduced to $28 million. This new figure would put the total amount of funding BitTorrent raised at $36.4 million.

I guess this is the icing on the bad news cake BitTorrent’s been eating all year, but it’s been particularly bad as 2008 closes out. In August, the company laid off 12 people (roughly 20 percent of its staff at the time). Then in November, Ahswin Navin, BitTorrent Inc.’s president and co-founder, left to form an incubator-like startup with Steve Chen of YouTube. A day after he quit, BitTorrent laid off another 18 people and dropped CEO Doug Walker (who was there for a little over a year). Then, on Nov. 17, the company shut down its Torrent Entertainment Network.