Concert ticket sales site Posse has raised $1.2 million to change its focus — dramatically. The company which previously helped connect bands with fans and sell concert tickets, will instead use its skills to target the massive retail market, and connect retailers with their customers.

“I think it’s taken a lot of courage to pull down a site that was actually working, to build something entirely new,” explains Posse CEO Rebekah Campbell, a former music mogul who built Scorpio Music in Australia, recalling the moment the Sydney-based concert ticket sales website shifted gears.

Charles River Ventures Partner Bill Tai is a big supporter of the shift, and led this round of financing as an Angel Investor, joined by founders of eBay and Remarq. Tai is also one of the original Angel Investors in Tweetdeck (Acquired by Twitter) and Tango, as well as an investor/Board Member at Scribd. 19 of his investment companies have IPO’d.

Posse started out as a platform that rewarded music fans for promoting tickets to shows. Keen to get in on the act, nightclub owners started to approach Posse, asking them to build an app for door sales. That’s when the lightbulb went off for Campbell and her 12-person team: If nightclubs could use their technology, then so could retail shops like hairdressers, restaurants, gyms, and hotels.

So they ran trials with a few retailers in February using their original music/ticket sales system as a rough and ready proof-of-concept. In just three weeks one Posse salesperson had signed up 50 stores to participate in the trial.

“They found our platform to be a better model than daily deals which were costing them money, annoying their existing customers, and attracting bargain hunters who never came back,” says Campbell.

But those retailers weren’t ready to pay to use the platform, especially with so many rival apps promising the earth. Campbell’s potential customers wanted proof that the Posse app would add “significant” value to their life.

So the Posse team went back to the drawing board, ran 14 focus groups, conducted dozens of user interviews, and held team strategy sessions for four weeks, including one at the beach. How would they make a platform that’s fun and original so customers would want to use it?

There was a moment during one of these team sessions when the final idea just clicked and came to life: to create an experience where people could create their own streets and their own towns with their favorite, as well as their friends’ favorite restaurants, shops, and other businesses such as gyms, hair stylists, and even cleaning services. Imagine SimCity meets Yelp.

“We wanted to give people a cool way to display their real world places in the virtual world that’s easy to share and easy to search,” says Campbell.

Posse has designed a set of hand-drawn storefronts that represent cafes, retail shops, restaurants, and more. As people add their favorite places, they’ll pop up on their street. The company has collected thousands of logos and pictures of restaurants from across the Web, and those will be displayed in the window of the storefront. If I frequently visit a specific Starbucks in the Financial District of San Francisco, the Starbucks logo and a picture of the Starbucks will be displayed in the window of the cafe on my street. For businesses not currently in the database, Posse will contact proprietors and ask for the necessary images and other information. Each new business provides a potential lead for the Posse sales team:

“Our vision is to possibly charge businesses to upgrade and personalize the storefronts that appear on each street,” says Campbell. “Maybe they could pay to add a second story to the storefront or maybe add decorations for the Holidays and such.”

When Posse launches next week, businesses will already have the opportunity to connect with their customers. They will be able to see who’s adding them as a favorite and be able to offer their customers rewards. The reward, such as a coupon, will be displayed in front of the storefront on a customer’s street in the form of a wrapped gift box.

The benefit for customers to use Posse is not only the ultimate ability to receive gifts from local businesses, but more importantly, to be able to quickly and easily see their friends’ favorite spots. If they’re searching for places to eat in the Mission area of San Francisco, their friends’ favorite spots will pop up, as well as their friends’ friends if they choose.

As someone adds their favorite spots, comments on their friends’ favorite spots, or add tips, they earn points. Those points add up and users can earn trinkets for their storefronts such as an Eiffel Tower, if they have multiple favorites in Paris, or a wine glass, if they have multiple wine bars on their street. The goal of Posse is to “gamify” the experience of collecting and searching for new experiences.

For Posse to succeed, they’ll need to ensure a pure experiences for the customer. If, for example, companies start bribing people to add their storefronts to their streets, the results will quickly become skewed. (I would guarantee I would add a Starbucks storefront if I would get a coupon for a free soy vanilla latte, even though my favorite coffee shop is LaCoppa Coffee in Novato.)

Companies already bribe people to “Like” their pages on Facebook. It’s typically a sign-up reward for first-timers. For example NBC 11 in the San Francisco Bay Area recently offered a free iPad for one lucky person who hit the “Like” button that evening. I did it, but didn’t win the reward. So, I “Unliked” the page that night.

Investor Bill Tai doesn’t think that’ll happen with Posse: “It’s a much deeper expression of a person’s interests than just pressing a “Like” button, so people are more likely to only add their real favorites.”

When Zynga launched CityVille a couple of years ago, I wrote a piece for Forbes talking about how companies should plant players in the game and open franchises to promote their real-world products in the virtual world. I’ve been disappointed by the turnout. I believe it’s a big missed opportunity,

Posse launches June 12th. The app launches on Apple’s App Store in July.