VentureBeat

With the popularity of virtual worlds like Second Life, enterprises and other organizations are taking an interest in creating virtual environments to communicate better.

Menlo Park, Calif.-based Forterra Systems helps create virtual worlds for corporations, government agencies, and healthcare industries. The company is in the midst of raising $10 million in venture funding, according to an interview with CEO David Ralston on Venture Wire.

Ralston said that previous shareholders will be part of the new round, which will be led by In-Q-Tel, the investment arm of the Central Intelligence Agency. Others include Chichen Itza Ventures, Jerusalem Venture Partners and Sutter Hill Ventures.

The company has closed on $3 million and expects to get the rest next month. Customers use the company’s tools to create realistic virtual worlds that enable collaboration, better training, rehearsals and planning. The customers range from the U.S. Army to Stanford University’s School of Medicine.

The company was founded as part of There.com in 1998. It raised about $35 million, mostly from individuals, before a recapitalization in 2004. The company’s existing shareholders provided $9 million after the recapitalization. Forterra spun out of There, while Makena Technologies focused on its own consumer-oriented virtual world, There.com. Makena also runs virtual worlds for MTV such as Virtual The Hills.

One of Forterra’s main competitors is Qwak, a designer of “virtual workplaces” that has raised around $8 million to date. Unisfair also creates virtual sites for companies to stage online events such as trade shows. Indirectly, Second Life is also a competitor as it gets corporations such as IBM as customers. IBM has built islands where it trains new employees on topics such as pursuing sales leads. That means Second Life and Forterra will be competing for the same corporate customers.