With its customer list growing, Karma Gaming of Halifax has announced the $4 million first closing of its Series A round of venture capital in what is believed to be Atlantic Canada’s biggest VC financing from outside the region in almost two years.

The developer of video games for regulated lotteries has received $2.5 million from Rho Canada Ventures, the Canadian arm of Rho Capital Partners, which has offices in Palo Alto, Calif., New York and Montreal, and $1.5 million from Innovacorp, the Nova Scotia innovation agency. Paul LeBlanc, co-founder and CEO of Karma Gaming, said there is a chance the company would raise additional equity financing in the current round.

The deal is important for Karma itself because the company has signed deals in Australia, Mexico, Canada and the U.S., and will roll out its first product in the U.S. in September. The company has pioneered video games for regulated lotteries, but the regulatory, technical and commercial complexity of the deals creates a long turn-around time. The funding will help to accelerate development and cover corporate operations until revenue begins to roll in.

“We have to scale up,” said LeBlanc. “This will allow us to expedite the pipeline  . . . and allow us to scale up our sales channel.” He added that company now employs 10 people in Nova Scotia and the current financing and sales deals will allow it to double that number.

“This is a tremendous product and a tremendous team and a tremendous investment opportunity,” said Innovacorp CEO Stephen Duff in an interview. He said his agency is always interested in joining a VC deal in Nova Scotia in which the lead investor is a fund from outside the region.

Atlantic Canadian startups have done a great job of attracting seed financing (usually amounts of up to $1 million) in the past two years, and now there are dozens of companies in search of follow-on funding, usually in amounts between $3 million and $10 million. The funding bodies in the region simply don’t have the capacity to meet all the demand for funds, so there has been a concerted effort by Innovacorp and others to increase funding from outside VCs.

Though the region’s startups received strong funding last year, with 65 companies stating they had received a total of at least $59.1 million, one shortfall was the paucity of VC funding from outside the region. Only about five companies reported VC investments from outside Atlantic Canada, including LeadSift’s $500,000 funding from OMERS Ventures of Toronto and CarbonCure’s funding from Toronto-based 350 Capital, whose value was never publicized.

The last multi-million-dollar external VC funding announced in the region was Unique Solution’s $30 million funding by Northwater Capital of Toronto.

Jeff Grammer, the  Rho exec who led the investment, has traveled to the region repeatedly in the past few years, and met LeBlanc at DemoCamp Halifax last September. He and Thomas Rankin, Investment Director at Innovacorp, will both join the Karma Gaming board.

Karma has devised a solution for a problem that afflicts regulated lottery companies around the world: their clientele is aging, and young people are not interested in buying weekly lottery tickets. So the company is developing video games that will include a modest cash prize. In September, Karma signed an agreement with Brisbane, Australia-based lottery operator Jumbo, under which the Halifax company will launch an interactive game that users could play to pick lottery numbers.

CTO Jay Aird said recently Karma has since signed three more major clients, though he is barred by confidentiality agreements from revealing their names.

The startup had previously received about $750,000 in seed financing from a selection of angels, including $250,000 from Groupon CTO and Dalhousie University alumnus Paul Gauthier. It has leveraged those investments with loans from the Atlantic Canada Opportunities Agency.