Billionaire funds web news rival to San Francisco Chronicle paper

One of America's oldest and largest newspapers, the San Francisco Chroncile, faces a new online-only rival from today, with the launch of Baycitizen.org – a not-for-profit website that is part of a growing trend reshaping US journalism.

The new website is being funded by a rich local businessman, the private equity billionaire Warren Hellman, with contributions from other charitable donors and local citizens who have been galvanised by a fear that local journalism is under threat because of the decline of newspaper circulations.

Similar ventures are springing up across the US, aimed at filling holes in coverage no longer provided by papers – but also adding a new competitive threat to existing papers.

Baycitizen.org has hired 15 journalists and has an annual budget of $5m (£3.5m), which it hopes to more than double by drawing in additional donors and advertisers. It is following in the footsteps of other civic-minded online ventures elsewhere in the US, including voiceofsandiego.org, Texas Tribune and MinnPost in Minnesota. A similar non-profit organisation called ProPublica, which covers national news, won a Pulitzer Prize earlier this year, signalling a breakthrough for new media organisations.

Lisa Frazier, hired from the consulting firm McKinsey to be chief executive, said the 14-month fund-raising drive has generated significant momentum. It was developed with a $5m grant from the Hellman Foundation and also with funds from the Knight Foundation, which gives money to innovative journalism projects.

"Here in the Bay area, we have lost 50 per cent of our journalists over the past five years," said Ms Frazier, "and original content generated here has declined by 60 per cent. It is going down twice as fast in core areas such as governance, health, science, arts and culture and the environment. We are losing the tool for civic debate and civic engagement."

Baycitizen and its peers operate a similar business model – and are covered by the same laws – as public broadcasting in the US, where periodic pledge drives fund local radio and television stations. As a result, Baycitizen will not be able to endorse political candidates, but Ms Frazier promises that the website can "turn it up a notch" compared to public broadcasting, because it can foster an online debate with readers.

And she hopes it will blaze a trail in local journalism. It has been an "embarrassment" that the Bay area, which includes Silicon Valley, did not until now have a news organisation run on these pioneering lines, she said.

"We hope to develop the tools and models and approaches that can support organisations that are trying this elsewhere," she said.

Rick Edmonds, a media analyst at the Poynter Institute, says that with the economy picking up, now is "a good time for experiments" in journalism – both for new companies and for newspapers, which have been cutting costs to make up for the slump in advertising revenues during the recession.

However, he sounded a note of caution about the enthusiasm of well-heeled charitable organisations for journalism. "These new sites are front-end loaded with money, but it is not so clear what will be sustaining them over time. Philanthropic money, especially from foundations but from individuals too, tends to favour the start-up. It may be less interested in covering the losses in years three, four, five and six."

Hearst, the media giant which owns the San Francisco Chronicle, threatened to shut it down last year until its 1,500 journalists agreed to deep cuts.