Casual gaming community Kongregate has closed a $5 million series A round led by Greylock today. This is on top of a $1 million angel round they raised from Reid Hoffman, Joe Kraus, Jeff Clavier and Richard Wolpert, among others. The casual gaming category consists of all those addictive online flash games that often distract you during your downtime (remember desktop tower defense?). James Slavet of Greylock pegs the casual game market at $500 million and expects it to grow even larger.
Compared to the incumbents like Miniclip, Kongregate is modeling itself after Xbox Live. They have built a gamer social network around the games, where gamers can gain ranking, earn awards, and collect trading cards (used in another game). Developers are encouraged to upload games to the site through “game of the week” contests and a revenue share of the ads that are displayed next to the games as they are played (25%-50% depending on exclusivity).
Kongregate plans on putting the lions share of the cash towards site development. As part of that, Kongregate will be financing 8 to 9 developers to create premium games for about $20-$80,000 each. Each of the games will have a free version with an optional paid upgrade to a full version. In exchange for a limited time exclusive distribution agreement, developers will get the majority of that income. Development times are expected to take 2 to 6 months. Kongregate also plans on monetizing through game specific sponsorships (once they hire an advertising manager). They’ve taken a large round considering their burn rate is $80,000 a month for a team of 9.
Since launching last October, Kongregate has gone through some significant growth. The site has grown to 800,000 uniques last month (300K May, 50K March), with 60,000 registered users. Those visitors can choose from a library of 1,400 games and play for an overage of 38 minutes on the site.
Now if they can only give me my weekend of Desktop Tower Defense back.