An early effort to create a free-standing business of community-based local news websites -- financed by advertising -- has  secured $3 million in venture-capital funding, signaling that "smart money" believes the concept has potential. Backfence Inc., of Falls Church, Va., started by a former WashingtonPost.COM executive, is backed in part by Pierre Omidyar, founder of eBay.

"We believe we are the first," Mark Potts, chairman and co-founder of Backfence told the Media Giraffe Project on Thursday. He asserted that other local-news web startups are "one-offs" focused on a specific community. "We built this thing to go national," he added. Potts said the money would be used in part to hire advertising sales staff and generally to begin expanding Backfence to other communities besides the three in metro Washington, D.C., already launched. The goal is to be operating 10 community sites in each of 16 metropolitan areas within three years.

 "We're delighted to have two investors with the caliber and industry expertise of SAS Investors and Omidyar Network," added Susan Defife, CEO and the other co-founder of Backfence, said in a news release posted on the Backfence website. Defife's background is in Internet market research and as founder of womenCONNECT.com.

Asked if the investment validates the ad-support local web news model, Potts replied in an interview on Thursday: "I think it gets us started at validating it . . . I think we have to go out and prove there is an advertising and consumer model for it." He said Backfence needed the investment to hire advertising sales people in part because of a need to respond to "huge interest from advertisers."

In part, said Potts, Backfence is investing in a field, which was pioneered by Microsoft in the late 1990s with its "Sidewalk" local listings service and the CitySearch.com operation. Five years ago, however, local advertisers didn't even understand the language of web advertising, he said. Now they do. "I think it has been tipping for the last few years." In addition, he said, daily and even weekly print advertising is now viewed as expensive by local advertisers.

"Even the weeklies [in metro Washington], it is $500 for a half page and it is black and white and you can't track it," said Potts.

Discussing how Backfence compares to other early-stage local news operations, Potts said Backfence has no intention of hiring reporters. Rather, original local information will continue come entirely from citizen/user contributors, and the most that Backfence will typically do is position where copy should appear on its sites. Will that every change?

"Hopefully never," says Potts. "We are not editing content, we are just letting the community do what it wants to do. It is a cost issue, a philosophical issue and a legal issue. We just believe there are stories out there that need to be told that people want to tell . . . and they don't want it mangled by somebody else."

Potts declined to say which U.S. metropolitan areas Backfence is eyeing for expansion. He said options include starting from scratch either owning or franchising, partnering with an existing independent local news website, or with a mainstream news organization. Asked what happens after three years, Potts said options could include being acquired by a mainstream media organization. "I'd be totally, totally fine with that," he said. But for now, he added, "the goal is to build a business that is successful and there are lots of outcomes to that and we'll play as we go."

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Click to get links to other "local" news sites identified by The Media Giraffe Project.

Read an Aug. 24 Q&A interview with Mark Potts