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VCs sweet on kids' virtual worlds

Venture capitalists are showing more interest in 3D playgrounds for kids online since Disney bought the virtual world Club Penguin for $350 million earlier this year.

SAN JOSE, Calif.--Venture capitalists have sweetened on 3D playgrounds for kids online since Disney bought the virtual world Club Penguin for $350 million earlier this year.

Just ask Jim Bower, CEO of Numedeon, which runs an 8-year-old virtual world for the 8-to-14-year-old set called Here at the Virtual World conference, Bower, who's also a professor of computational neuroscience at Caltech, said his life has changed a bit since that acquisition.

"We certainly get a lot of calls from VCs now," Bower said, adding that he has turned down at least one buyout offer from an investor.

It's no wonder VCs are salivating. Recent research points to vast expected growth in the market. Within four years, more than half of kids online--age 3 to 17--are expected to belong to a virtual world, doubling the membership in 2007, according to a study from eMarketer.

Anecdotally, adult-oriented virtual worlds also tout a rising population of tweens and teens. An executive from, for example, said at the conference that the site's fastest-growing age group is 13-year-olds and up.

Bower said his business has grown by 300 percent this year, thanks to more children joining the world and more marketers spending money to reach this demographic. has an educational bent, so the company only accepts marketing that will teach the kids something about the world, according to Bowers.

For example, Whyville recently opened a bank sponsored by Bankinter, the fifth largest bank in Spain, so that kids can deposit and earn interest on their "clams." Since it's been opened, one in four clams circulating in the virtual world has been deposited in the bank, Bowers said.

No doubt, that's the kind of return on investment VCs like.

Proving their interest, a group of venture capitalists will be speaking here on a panel late Wednesday. Executives from Charles River Ventures, Redpoint Ventures and Scale Venture Partners will be talking about trends and business opportunities in virtual worlds.