SMALLTOWN ANNOUNCES $3 MILLION SERIES A FUNDING TO LAUNCH BUILD-OUT OF LOCAL WEB

Pilot Towns in Silicon Valley Region Are Company's First User-Generated Local Content Sites; Webcards Win Adoption from Local Businesses

SAN MATEO, Calif. – October 10, 2006 – Smalltown (www.smalltown.com), a new user-generated content site building a "local web" platform to connect businesses and neighbors with their surrounding community, today launched from stealth operations and announced $3 million in Series A funding from early-stage technology investor Formative Ventures. The capital will be used to advance Smalltown's strategy to build the infrastructure for a truly local web by connecting families, service providers, merchants and organizations to find and share information about the important things close to home.

Smalltown's unique patent-pending technology enables the company to launch dedicated websites for hyper-local neighborhood communities, where the company will actively partner with community members to ensure a vibrant online presence. Smalltown websites will be networked to create an integrated platform called the Local Web. Today also marks the public launch of their first pilot town – Smalltown, Burlingame. Smalltown, San Mateo will follow on October 16th.

"The integrated Local Web doesn't exist yet," said Hal Rucker, CEO and co-founder of Smalltown. "Today there is local search, which offers a mix of information that is difficult to track and use; social media platforms, where people can meet and share reviews and recommendations; and classified sites, where people can find roommates and sell cars. But there really isn't one generalized platform where people in a local community can find and share information about all things local – nannies, items for sale or exchange, local events, merchant coupons, weekend activities, you name it. Smalltown is building a platform for the Local Web, a network of hundreds of hyper-local sites that have the granularity to address the needs of local economies."

While most commercial searches are local in nature, according to Borrell Associates, fewer than half of the nearly 12 million small businesses in the U.S. have websites. Two trends are driving growth in the local marketplace and paving the way for companies like Smalltown to succeed: (i) the explosive growth in local search (predicted to reach $1.7 billion in 2007, Borrell Associates 2006), and (ii) the adoption of social media.

About Smalltown's Patent-Pending Webcard™ Postings

Smalltown is setting out to empower local neighborhood-style communities with a unified and integrated online user-generated content search tool, called a "Webcard," that provides all of the functionality of a website without having to build one.

Webcards are similar to an index card that you might post at your local grocery store, yet they are enhanced by rich content and functionality and can be linked together to form discussions. Through the use of Webcards, Smalltown encourages an interactive local exchange where people can easily post, search, update and share information on everything from the most reliable handyman to Saturday afternoon activities. Users can also access information found on Smalltown Webcards through popular search engines on the World Wide Web.

"Smalltown recognizes that full-blown websites are overkill for the majority of local businesses – and frustrating, because they can be hard to maintain, and hard for the consumer to find," said industry analyst Peter Krasilovsky, whose blog "The Local Onliner" covers local and small business activities on the web. "Smalltown's Webcard is especially attractive because they are easily populated with information and updated. It is also a major plus that they can be collected and shared by local consumers."

Using Webcards

Webcards can be used to aggregate, share and search all types of content – from reviews and recommendations to local event listings and classifieds.
Webcards can be enhanced with features that offer additional functionality, including coupons for generating traffic and tracking promotions, photo galleries, video, and automated "contact us" reply forms. Additional features will be added in the future.
Each Webcard has a unique web address, enabling small business owners to have an online presence without spending money on building and maintaining an independent website.
There is no cost for creating a basic Webcard. Enhanced Webcards are available for a monthly $40 listing fee.
There are no subscription or membership fees to join a local community and gain access to Webcards.

"Smalltown is pursuing the $100 billion local ad market opportunity in a way that both merchants and neighborhood users can understand," said Clint Chao, co-founding general partner of Menlo Park-based Formative Ventures, who spearheaded the investment and joined the company's board of directors. "For a fraction of what a traditional Yellow Pages listing or classified ad costs, locals – who might be merchants, schools, moms, anyone – can create compelling and dynamic Webcards to get their messages across to the people who live in their community.

"Smalltown truly serves the needs of our local business community and we welcome them as a member of our vibrant ecosystem," said Linda Asbury, president of the San Mateo Chamber of Commerce. "Smalltown Webcards provide a missing link for businesses in San Mateo to market their services to their immediate customers – nearby residents, especially families, who rely heavily on word of mouth recommendations from people and groups that they trust. We've enjoyed working with the founding team and believe that they are creating a vehicle that serves the local market in a way that has not been done before."

Smalltown will generate revenue through the sale of enhanced Webcards. The company intends to launch town by town beginning in October 2006, and will actively partner with local city advocates and residents to ensure that each Smalltown site meets the unique needs of each independent community.

About Smalltown

Privately held and headquartered in San Mateo, California, Smalltown was founded in 2005. The co-founders, including Hal Rucker and Mark Jenkins, had a vision for how they could better utilize the World Wide Web to find the things they need in their own neighborhood. Smalltown is building the infrastructure for today's Local Web, which will support a network of hyper-local Smalltown community sites equipped to empower local economies and promote the vitality, individuality and immediacy of each local community – one "Smalltown" at a time. Smalltown is funded by Formative Ventures, an early-stage technology venture capital firm launched by partners with firsthand operating experience in growing start-ups into successful companies. The first pilot town, Smalltown, Burlingame is currently open for business near the company's headquarters. A second pilot town, Smalltown, San Mateo, opens to the public on October 16th. For more information visit Smalltown at http://www.smalltown.com.

About Formative Ventures

Formative Ventures, headquartered in Menlo Park, California, is an early-stage venture capital firm that invests in emerging-technologies start-up companies in areas such as communications, wireless, and Internet solutions. Formative was founded in 2000 by experienced entrepreneurs Brian Connors and Clint Chao, who each bring more than 20 years of start-up experience to complement his investment track record. The partners developed a passion to engage with early-stage companies during their "formative" years, when a company's initial strategy and pursuit toward market leadership first come together. Formative is investing its second fund, the Formative Ventures Emerging Technology Fund, which together with the predecessor fund has $95 million in capital under management. Formative is backed by some of the venture industry's most prestigious institutional limited partner investors. For more information visit Formative Ventures at http://www.formative.com.