Zynga Raises $29M(!) from KPCB and IVP

Zynga, the San Francisco-based online gaming service led by serial entrepreneur Mark Pincus just completed a $29 million Series B led by Kleiner Perkins Caufield & Byers and Institutional Venture Partners.

Zynga’s existing investors, Union Square Ventures, Foundry Group and Avalon Ventures also participated in the round, which brings Zynga’s total funding to $39 million. “With this new investment, we are doubling down on social gaming,” said Pincus in a release that just went out. (Zynga, an 80-person company, is best-known for games applications like Texas Hold Em’ Poker, BlackJack, and Scrabble that appear at Facebook, MySpace, Friendster, and various other social networks.)

KPCB partner Bing Gordon, who founded the games giant Electronic Arts, has joined Zynga’s board, which also includes LinkedIn chairman Reid Hoffman, Foundry Group’s Brad Feld, and Pincus.

TechCrunch had the news late last night, and spoke with Pincus, who claims the company is cash flow positive and hasn’t touched the first round of $10 million that Zynga raised last January.

What I’m wondering: why then raise nearly $30 million more? Pincus says he’ll need to start spending more on production values and marketing. No doubt the company — which just acquired YoVille, a virtual world application for Facebook — will also look to acquire more competitors. But it still seems like an exorbitant amount to do that. Readers, what do you think?