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Summary:

Machinima.com, a site for user-generated content created using video games, has raised $3.85 million in funding from MK Capital and other private investors.

Machinima.com, a site for user-generated content created using video games, said today it has raised a $3.85 million Series A round of funding from MK Capital and other private investors.

It’s notable that Machinima.com is getting funding during an economic downturn that has the potential to adversely impact the startup on just about every one of its fronts. A number of online video sites are announcing layoffs, video game companies, which were once thought to be recession-proof, are reducing headcountsas well, and online advertising is starting to weaken. Never mind that Machinima.com is all about user-generated content, which advertisers have been reluctant to spend money on.

According to CEO Allen DeBevoise, Machinima.com videos were viewed 35 million times last month, and the company is getting roughly 3 million uniques a month. Machinima.com’s YouTube channel ranks ninth in terms of subscribers, and it frequently appears on Video Breakouts’ top 10 list of the most-viewed Internet video producers (which can be found in our weekly StatShot).

Ads are being sold on its YouTube channel through both Machinima.com’s own sales team and through YouTube. And DeBevoise said his company has escaped any advertising downturn as video game companies ramp up marketing efforts this time of year, which is traditionally its busiest season.

However, the company is hedging its bets by opening up other revenue streams as well. DeBevoise said Machinima.com is pushing more into e-commerce and is experimenting with taking in inventory and selling games through the Amazon fulfillment program.

Machina.com, which currently has fewer than 20 employees, will use the new money to fuel business expansion. DeBevoise also said it will expand its original web series development in 2009 to include content from more creators, similar to the deal it has with Felicia Day (who will speak at NewTeeVee Live next week – get your ticket here!).

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