Seven months into its bid to reinvent the metro newspaper, The Bay Citizen, the San Francisco-based nonprofit news site, has so far raised a total of $14.5 million in philanthropic gifts, rolled out daily online news and culture coverage with a 26-person-staff, and, during November, attracted a monthly audience of approximately 200,000 unique visitors. It’s on track to spend $4 million during its first year.

I interviewed editor-in-chief Jonathan Weber in The Bay Citizen’s downtown San Francisco office, and later by e-mail and over the phone, to find out what he’s learned from the site’s first half-year of operation — editorially and financially. This is the first in a two-part series.

In a world where many local nonprofit startups are shoestring operations run by refugees from downsized or shuttered metro papers, The Bay Citizen’s relatively large budget continues to attract scrutiny — and some hostility. (As a quick comparison, the national investigative nonprofit ProPublica spent approximately $9.3 million last year, and the local civic news outlet Voice of San Diego spent approximately $1 million.)

“I’m honestly mystified as to why so many journalist-commentators seem to think that spending real money on journalism is a bad thing,” Weber told me. “I’ve been there, and there is nothing especially virtuous about being broke.” Moreover, he said, “I would challenge anyone to take a hard look at what we do — and I mean really dive in in a serious way over a period of time — and tell me that we are wasting money.”

F. Warren Hellman, the San Francisco investor who provided $5 million in seed money for The Bay Citizen, initially described it as a journalistic mainstay during the “inevitable” demise of local newspapers, and said it “might put journalism, broadly defined, on a much more stable foundation.”

Since then, the outlet has emerged as a general interest site for the entire Bay Area: It provides lists of weekend events, covers breaking news, and has even commissioned local author and artist Dave Eggers to produce a series of whimsical sketches of a World Series game. Instead of focusing, as most sites do, on a smaller geographical area, or a content vertical (like the Gawker Media blogs, or NPR’s local, topic-based Argo blogs, which launched this fall), The Bay Citizen is assuming the entire portfolio of a print paper.

“Others might disagree, but I have never seen any critique related to what we actually do journalistically,” Weber said. “It’s sort of this abstract, ‘Gee, you guys are spending an awful lot of money’ — and that kind of criticism makes no sense to me.”

The latest debate over The Bay Citizen’s finances came late last month, after an item in the Chronicle detailing (and mocking) The Bay Citizen’s solicitation of $50 memberships implied that the outlet had spent all its $5 million in seed money. PaidContent’s Staci Kramer responded with a deeply reported rebuttal to the Chron’s claim, noting that The Bay Citizen, with first-year spending at $4 million, was on budget — and that, far from being broke, it had actually raised $9.5 million on top of the Hellman money.

At the same time, other journalists involved in smaller nonprofit and local news ventures voiced their skepticism about the necessity of multi-million-dollar budgets. Howard Owens, publisher of the online-only Batavian in western New York, tweeted, “My question is, why do they need more than $1mill operational cost per year in SF?”

Weber responded that for a staff of 26, a $4 million budget was reasonable. (Steve Katz, publisher of the San Francisco-based nonprofit magazine Mother Jones, backed up that math.) But The Bay Citizen is also finding ways to amplify the work of its staff. Perhaps its most innovative step so far has been to position itself as a partner and umbrella site for the Bay Area’s many hyperlocal blogs.

The content on The Bay Citizen’s website is the product of a “range of different relationships,” Weber notes. On the front page, for instance, there are articles by staff reporters and paid freelancers. There is also content from the outlet’s community blog partners, who typically get paid $25 for every article The Bay Citizen re-posts from their sites. (The re-postings also appear on pages that are branded with the blog partners’ names and three additional links to articles on their homepages.) Weber has said repeatedly that he wants The Bay Citizen to be “a connector and a hub for an emerging ecosystem” of local blogs.

The site also features a Citizen Blog, which is open to pretty much anyone who wants to blog on local topics. (The Chron features a similar mix of content on its homepage, including citizen blog posts and stories from local partner sites, together with national wire stories, a “Daily Dish” of entertainment news, sports coverage, photo slideshows, and, of course, lots of advertising.) The Bay Citizen’s homepage features a single ad, as well as a jar of change with the slogan “$1 a week helps. Save Independent Reporting.”

The Bay Citizen’s local blog partnerships also include joint reporting projects between staffers and outside bloggers. The finished articles run both on the Bay Citizen and the local blog. They’re partnerships, Weber said, that can bring together the inside-baseball knowledge of local bloggers with the bigger-picture political perspective of staff reporters. “We have a different philosophical view about partnership and the role of non-staff people of various descriptions, and what role they play in the bigger project,” he notes. “I think traditionally mainstream media organizations have always had a religious view that ‘all news comes from here’ and ‘we don’t really publish other people’s news,’ and we definitely don’t.”

The Bay Citizen has also found “a sweet spot in mid-range enterprise news,” Weber said, as in its story about a payment scandal in the San Francisco Unified School District. These aren’t three-month, “capital I-investigative reporting” projects, as Weber put it, but quicker stories that might need only a single records request to pull together. (The Center for Investigative Reporting and its offshoot California Watch, which specialize in long-term investigative reporting projects, are right across the Bay in Berkeley.)

While the idea for The Bay Citizen was conceived at a time when the San Francisco Chronicle was hemorrhaging millions and seemed close to shutting down, the outlet is now competing with a more stable Chronicle (whose print circulation, at last reporting, was 223,549 on weekdays) as well as a slew of other Bay Area news outlets, large and small. It’s doing so with the ambitious plan of leveraging its first few years of philanthropic funding into the kind of popular support that makes public broadcasting-style membership drives viable.

For all that, Weber said, employing a large staff — with business-side as well as journalistic expertise — makes sense. “The rationale on staff size is pretty simple,” he notes. “If you’re going to bite off something big and ambitious like doing daily and enterprise news and multimedia on a wide range of subjects for a large region, and producing 2 pages twice a week for The New York Times, you need the people to do it. ‘Big’ is a relative term. We have a big staff compared with New West or many other local start-ups, but we’re very small compared with any metro newspaper, and also smaller than ProPublica and CIR, as comparisons.”

While the $400,000 salary of Lisa Frazier, The Bay Citizen’s CEO, has generated particular criticism ever since it was announced last year, Weber has repeatedly said that “journalists tend to undervalue business experience.” And he told me that The Bay Citizen’s four-part revenue plan — which starts with large gifts and grants, and then aims to ramp up membership revenue over several years, bringing in additional money through syndication and underwriting — is complicated enough to need a sophisticated business manager. He also noted that The Bay Citizen’s ability to raise so much money in large gifts is indicative of the fact that major donors feel more comfortable giving to organizations with experienced businesspeople at the helm.

“How do we expect it to pay off?” he said. “By creating a great news operation that produces and supports important and interesting journalism and attracts a wide audience, which in turn will create financial support.”