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PhotoRocket, the photo sharing service that launched to much fanfare at the DEMO conference earlier this year, has cut about forty percent of its staff after hitting a financing wall, GeekWire has learned.

As part of the cutbacks, Anna Collins — the former Microsoft general manager who joined the company as president in April — has stepped down.

“When we went to get funded in the Valley, they loved what they saw and heard, but we ran up against market conditions that are very different now from where we started out,” PhotoRocket co-founder Scott Lipsky tells GeekWire. “In short, we hit the ‘mobile, social, local’ wall of Sand Hill Road.”

That’s a reference to some of the most overheated segments in Silicon Valley, especially with the rise of online photo services such as Color and Instagram.

As a result of the cutbacks, the company has reset its focus on product development. PhotoRocket co-founder and vice president of product and technology Michael Cockrill has assumed the CEO duties.

Collins, who spent seven years at Microsoft and oversaw the company’s Ad Center search advertising business, will remain on the board as an advisor.

“Our plan is adjust our product direction and come back out swinging with a lower burn, a higher velocity and a tighter story,” explains Lipsky, who previously co-founded aQuantive. The company, which as of last fall employed about 15 people, previously raised more than $1 million.

Here’s a closer look at how PhotoRocket works:

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