Web anonymity service cuts staff

Privacy technology developer Zero-Knowledge Systems said Thursday it has laid off about a quarter of its staff despite recently raising $22 million in funding.

Montreal-based Zero-Knowledge has developed software, dubbed Freedom, which lets people conceal their identities online. Freedom allows consumers and businesses to shop, chat, send e-mail and surf the Web while covering their tracks so that Web sites, Internet service providers and law enforcement officials cannot monitor or review their activities.

Zero-Knowledge said that it laid off between 60 and 70 employees out of a staff of more than 250 people as part of its efforts to restructure the company. Zero-Knowledge said it still plans to add some new positions, including hiring some key executives.

"The privacy space matured this year, and we expect...tremendous customers," Zero-Knowledge Chief Executive Tamas Hevizi said. The layoffs "were driven by some of the new needs we had and the new skill set that we needed."

Zero-Knowledge joins the never-ending list of layoffs generated by the current advertising doldrums. Layoffs were announced this week at companies such as Compaq Computer, Motorola, TechTV, Britannica.com and Grassroots.com.

Hevizi said Zero-Knowledge is shifting from a research and development focus to delivering its technology and services through sales and marketing services.

Zero-Knowledge said its recent $22 million round of funding brings the total amount of financing to $59 million. The consortium of investors included Reuters, Platinum Venture Partners, Aragon Ventures, Strategic Acquisition Ventures and Yorkton Securities.

Hevizi said that the new funds will be used to broaden the delivery of its industry technology and services to its customers, such as by establishing sales channels.