MC Hammer in serious financial trouble, will DanceJam be far behind?

Former rap star turned startup founder MC Hammer is in serious financial trouble, and may be facing bankruptcy, casting some doubt on user generated dance site DanceJam.

According to reports, MC Hammer owes $671,182 to the IRS and the State of California in three separate tax debts, each of which has resulted in liens being placed on property owned by Hammer and his wife.

MC Hammer has declared bankruptcy previously (in 1996), and it’s not clear from reports whether the new debts may force him to declare bankruptcy a second time. What the do show though is that MC Hammer can’t pay his bills, and that could be representative of even deeper financial issues at play.

The news won’t help struggling startup DanceJam, that launched with much fanfare at the TechCrunch40 conference in San Francisco in September 2007. Hammer is listed as the co-founder of the site, and also holds the position of CSO; primarily his role for the site has been as its public face, a celebrity spokesman of sorts that promotes DanceJam in the media and at events. Having your star co-founder face bankruptcy and possible court time over unpaid tax isn’t a good look for any startup.

DanceJam has struggled to build any significant traffic, managing only 168,000 unique visitors in July according to Compete, and is ranked at 38,726 on Alexa. An angel round of $1 million was backed by Ron Conway, Michael Arrington and others, and Softbank Capital and Rustic Canyon Partners invested over two rounds of $3.5million and $3.92 million each. $8.42 million in total for stats that are lackluster isn’t a positive sign.