Digg founder Kevin Rose, an investor in Twitter, Zynga, Ngmoco and a later investor in Facebook, has cashed out 20 percent of his shares in Twitter.

Twitter’s most recent funding round gave the company’s shareholders an option to sell 20 percent or 100 percent of their shares if they wanted to cash out. Rose did not specify which option he took, but he said he sold shares in Twitter and “still believed in the company.”

Rose is also an investor in former TechCrunch editor Michael Arrington’s new early-stage investment fund, the $20 million CrunchFund. He is an investor in SV Angel and Greylock Partners as well, and his angel investing activities have slowed down while he starts working on his own startup, Milk.

“When you’re not actively doing angel stuff and you’re running a company, funds just make it a lot easier,” Rose said. “When you’re doing the active angel stuff you meet with companies back to back to back to back.”

Twitter confirmed that it is raising a large funding round from Russia’s DST, the investment company that has backed Facebook, Groupon and Zynga. The round is rumored to be around $800 million across a two-part funding round, which would value the company at nearly $8 billion.

Twitter has more than 300 million registered users who post more than 200 million tweets a day. Valued at $3.7 billion after its most recent round of funding in December, 2010, Twitter makes $200 million each year, according to analysts cited in the report.

[Photo credit: Matthew Lynley]