Bunchball raises $6.5M, doubles down on gamification

Updated. Bunchball, the social gaming software company, has raised $6.5 million in a new round of venture capital. The San Jose, Calif.-based startup plans to put the funds toward growth initiatives such as hiring, new product development, and international growth, CEO Jim Scullion told me in an interview last week.

The new round brings three new venture capital firms — Triangle Peak Partners, Northpoint Investments, and Correlation Partners — to Bunchball’s investor list. Existing investor Adobe Ventures also participated in the round. The latest raise serves as a Series C for Bunchball and brings its total funding to $12.5 17.5 million.

Gamification — the process of adding game-like mechanics to non-game applications to make websites more engaging — has become a tech industry buzzword in the past couple of years. Bunchball sells a software platform that allows clients such as Warner Brothers (s TWX) and Hasbro (s HAS) to build gamification features into their brand websites. These features allow brands to reward users that buy or engage with their content with rewards such as trophies, badges, points, or virtual goods. Bunchball claims its technology drives engagement because games satisfy “fundamental human needs for reward, status, achievement, competition and self-expression.”

But Bunchball was a little before its time when it launched in 2005, founder Rajat Paharia told me in a recent interview. “We had to be very evangelical and educational, and it wasn’t very easy at all.” It all started to get a bit easier for the company last year, when Zynga’s financial success brought online gaming to the forefront in a big way.

Gaming’s newly mainstream appeal has had a positive effect on Bunchball’s bottom line. The company does not disclose its revenue, but Scullion tells me its 2010 sales bookings were three times larger than in 2009, and its bookings for the first half of 2011 are set to double its 2010 figures.

Bunchball’s growth has brought a “few knocks on the door” from potential acquirers in recent months, Scullion said. The company opted instead to double down on its opportunity as an independent company. “We decided to raise the capital and move forward,” he told me. “We’re focused on growing a high0growth company.”

He’s certainly not the only one. Recent months have seen the debut of a bevy of new gaming mechanics startups, such as Badgeville and Big Door Media. But Scullion told me he views the new competition as a positive thing, as it “validates the market” his company has addressed for years. “Bunchball has the four-year lead on anyone else,” he said. “It’s the pioneer.”