Daniel James loves to show up at video game events dressed as a pirate. The CEO of Three Rings has announced he has scored a $3.5 million bounty in a venture funding round.

I visited Three Rings offices in an airy San Francisco loft years back when it had just four people and was at work on Puzzle Pirates, a casual online puzzle game. That game turned out to be a hit and helped the company generate $4 million in revenue in 2007. About $1 million of that was from subscriptions, but more than $3 million was from virtual currency.

Puzzle Pirates initially launched with a typical online game subscription model but it switched its emphasis to virtual currency a few years back where you can buy things in 20 cent or 25 cent micro-transactions. The games has an estimated 3 million user, and Three Rings also has a wild west called Bang! Howdy.

The success of that model has helped propel the company to 30 employees and is planning its new social networking game world, Whirled, where users will be able to create their own avatars, games, rooms, music, and pets. (Three Ring