Casual gaming startup Kongregate said on Thursday that it had received $5 million in its first round of funding. Venture firm Greylock Partners led the round.

The San Francisco-based startup combines social networking with gaming by allowing game developers to upload their games on Kongregate's web site. Gamers can chat with each other, rate games and write reviews on Kongregate.

CEO Jim Greer calls Kongregate the “YouTube” of gaming. Since the beta launch of the company in March, it has accumulated 1,500 games and 750 independent and small studio developers with more than 850,000 unique visitors a month.

To survive in the highly competitive gaming industry, Kongregate will need some high quality content, said Michael Cai, analyst with Parks Associates.

“They need some breakthrough games and will need to [give incentives to] game developers to drive traffic,” Mr. Cai said. “They need to grow the audience as quickly as possible as they are ad supported.”

The company is planning to use the extra cash to fund independent game developers who will create Flash-powered games exclusively for the site. The company expects to fund half a dozen of such games by the end of 2007.

The funding will also be used to become a larger platform for gaming, Mr. Greer said.

“We want to invest in independent developers and fund them to create bigger and better game experiences based on microtransactions,” he said.

Kongregate makes its revenues from in-game advertisements and shares the revenues with the developers. Developers can get from 25 to 50 percent of the ad revenue derived from their games, said Mr. Greer, who was previously managing game development for gaming site Pogo, now owned by Electronic Arts.

Kongregate also generates revenues through “micro transactions,” in which players buy game paraphernalia such as guns, swords or clothes, usually for less than a dollar or two.

Kongregate provides the tools and infrastructure to developers so they can focus on their creative strengths and make games, Mr. Greer said. The company also provides the customer support and billing for microtransactions for developers.

“We are trying to make the site more attractive to developers,” he said.

Kongregate is also trying to tap the social networking audience by creating its own application on Facebook. Users can display their top scores from games on Kongregate directly in their Facebook profile.

Kongregate, whose competitors include U.K.-based Miniclip and Viacom's AddictingGames.com, previously received angel funding from industry experts such as LinkedIn founder Reid Hoffman, Excite@Home founder Joe Krause, and Jeff Clavier.