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$5m to Kongregate: Casual Game Site Closes Series A

kongregateVenture investors tend to move in swarms, feeding off the hot trend and collective buzz.  Casual gaming remains the buzzword du jour in the gaming industry and therefore, not surprisingly,is also hot spot for funding activity.

Kongregate, a San Francisco based startup founded in 2006, is the latest to gain funding. The company has closed a $5m Series A financing led by Greylock.

The marketplace for Casual Games is not hot without reason. According to statistics from comScore, one in four Internet users worldwide, or a total of nearly 217 million people, play online games. Among these casual gamers, according to a separate Macrovision survey, 28% play more than nine game sessions per week.

More social network than game developer, Kongregate, as its play-on-words name suggests, is built around a connected community of game players and game developers.  The company’s web site hosts user-submitted browser based Flash (or Shockwave) games that are wrapped with Web 2.0 social networking features.   Participants can measure their performance with rankings, compete against one another for virtual prizes, or chat and otherwise interact in and around the games.

Game developers are encouraged to upload their own creations (without relinquishing ownership rights) and they are paid a share of advertising revenue. The amount of revenue sharing varies based on popularity and usage.   (It is similar to the model used by Revver for user-generated video)

So far, Kongregate is home to more than 1300 games.  Since entering a public beta in March, it drew more than 500k visitors a month in June (and reportedly is near a million now).   The site is entirely ad supported and the games are free to play.

Kongregate was founded in October 2006 by a brother and sister team.  Prior to this round, they received seed money from several Angel investors. The money from the new financing will be used to fund further development and may also be used to commission exclusive games for the site.

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