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Wattpad, which describes itself as the world’s largest online community of readers and writers, has raised a Series B funding round of $17.3 million from a group of venture funds led by Khosla Ventures and including Yahoo (s yhoo) co-founder Jerry Yang. The Toronto-based company announced the financing news on Wednesday at Book Expo America in New York. In an interview with GigaOM, Khosla partner Andrew Chung said he believes that Wattpad can transform the world of writing and publishing in the same way that YouTube (s goog) has transformed the world of video.

Although the five-year-old company only has 15 employees, Chung said Wattpad has produced “an absolutely phenomenal amount of growth” with very little investment so far (the company raised a $3.5-million Series A round led by Union Square in September). A social-reading platform that allows amateur authors to upload content and connect directly with readers, Wattpad hosts more than five million user-generated stories in 25 languages and half a million new stories are added every month. The network has 3 million registered users, up from 1 million in September, and according to the company, those users spend 1.7 billion minutes reading and writing every month, which is more than Pinterest.

Wattpad’s approach is similar to that of some online writing communities, in which authors and readers collaborate on a work, and much of what is created is designed to be read quickly online or on a mobile device rather than being published as a conventional book or story. Fan fiction based on characters from movies and TV shows is popular, and stories often evolve over time with contributions from multiple readers and writers. As Chung describes it:

You’re able to upload a story chapter by chapter, folks are able to comment on that chapter, and they can provide encouragement to the writer and actually signal where they’d like want the story to go, which creates a type of engagement that’s impossible in an offline context. There’s a very strong parallel to the way that YouTube was able to do that for amateur or user-generated video content.

Amazon (s amzn) also allows authors to create fiction and then publish it themselves through the Kindle platform, but Chung says Wattpad’s approach is different because it focuses on the community, and the content is designed to be consumed in a different way. “This is a different kind of content designed from the ground up to be consumed in a mobile and internet environment,” he said. “I’m reading this when I’m waiting for my girlfriend who’s in the change room, or waiting for the waiter to come with my order. I would liken a Kindle e-book to watching a DVD on my computer, versus watching a YouTube video on my iPhone.”

The signals from the community of readers and writers that Wattpad has built up can also become a powerful discovery mechanism, and a way of sorting through the massive quantities of user-generated content, Chung said. Readers can see how many others have read a particular chapter or piece of a story, how many people have shared it or favorited it, and can read the comments to see how an author is interacting with his or her readers. Some young fiction writers who use the service have seen their work get more than 10 million views, Chung said — and that in turn has led to them being contacted by traditional publishers and content companies.

Some writers that spent years trying to get their work published with the standard guys out there with no success, but after building a fan base with thousands of followers and millions of people reading their stories, some of them have been discovered and publishers have signed distribution deals with them — something that also mirrors the way that YouTube has been able to discover talent.

In addition to Khosla and Yahoo co-founder Jerry Yang, the funding round also included Union Square Ventures and Golden Venture Partners of Toronto. Chung said the funds would help Wattpad hire more staff and expand its services, and also develop partnerships with existing content-publishing and distribution companies.

Post and thumbnail photos courtesy of Flickr user Jeremy Mates