It looks as though Ngmoco’s decision to switch from paid iPhone game apps to a free-to-play, in-game purchases revenue model has paid off. Announced yesterday, Ngmoco has raised $25 million in their third round of venture capital. Without missing a beat, the company announced their acquisition of fellow iPhone game developer Freeverse (Skee Ball and NBA Hotshot). Ngmoco CEO Neil Young told Gamasutra that the new influx of cash will enable the company to “scale as quickly as possible,” in regards to it’s new free-to-play model.

The funding round closed at the end of 2009 and was lead by Institutional Venture Partners. As is customary, IVP general partner Sandy Miller will now take a seat on Ngmoco’s board of directors. Previous investors Kleiner Perkins, Norwest Venture Partners, and Maples Investments also took part in this round of funding, raising Ngmoco’s total investments to $40.6 million. Not bad for a 1.5 year old startup.

The Ngmoco and Freeverse courtship has been in the works for a while now, as Freeverse was the first developer to use Ngmoco’s “Plus+” social network tools into their games. From Ngmoco’s side, CEO Neil Young comments, “We’ve been thinking about how to accelerate our strategic growth though acquisitions of companies and intellectual property, and Freeverse was really at the top of our list.”

Brooklyn based Freeverse started out as Mac software developer, but quickly became entranced with the iPhone and gained notoriety for their chart topping apps on Apple’s App Store. Given their success with paid applications, Freeverse VP Colin Lynch Smith comments that Ngmoco, “had to make the case to us for free-to-play,” but “Neil and the guys at Ngmoco made a really strong case.”

“Neil’s vision for where the industry is going, and where the market is going, was pretty compelling, and we’re on board with that,” he added. “There are still some opportunities on the paid side, but the real opportunities are on the free-to-play side.”