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Teen virtual world Gaia Online raises $11 million

The San Jose, Calif-based community and game site attracts more venture capital to ensure that it further capitalizes on a booming population of teens in virtual worlds.

Gaia Online, a virtual world targeted at teens, on Monday said it has raised $11 million in a series C round of financing from Institutional Venture Partners.

The round brings its total financing to more than $32 million. Its previous investors include Benchmark Capital, Redpoint Ventures, and Time Warner.

The San Jose, Calif.-based company, founded in 2003, is among the most popular virtual communities for young people online, with reportedly more than 5 million monthly visitors (or 350,000 people who log on daily) who play games, socialize, and buy virtual goods in its marketplace.

Last year, the company hired celebrated economist Michael Boskin, a Stanford University professor, to be its chief economist.

Craig Sherman, CEO of Gaia, said the company plans to use the funds to continue developing the site. This summer, for example, Gaia said it will introduce a casual (and free) Flash-based massively multiplayer online game, or MMO, that has been in development since last year.

The funds are surely meant to help fend off a throng of rivals, such as Teen Second Life, and ensure that Gaia capitalizes on a growing population of teens in virtual worlds. Researchers estimate that the audience of teens in virtual worlds will more than double, to 20 million members, within the next three years.