"It's about being embedded in our community," Hatts tells participants in JEEcamp, an 'unconference' on journalism and enterprise.
Enterprise is the right word: Hatts was still a student when the site, which covers London's Bermondsey and Southwark, started. Now he, his father and a handful of contributors earn a living from SE1 and are on the brink of launching a 'cluster' of sister sites for other London areas.
What's more the site is an early adopter of new tools such as Audioboo and developed its own software to run it, rather than spending vast amounts on design. It has more than 1,400 followers on Twitter and more than 7,000 subscribers to its weekly news email.
Uniquely independent
But slow and steady growth is the plan for the site, which is unique in being fairly hard news focused - with crime and entertainment news the most popular topics, says Hatts.
"I'd like to bring in more voices and writers. I have partly shied away from that because I'd like to be able to pay them properly," he adds.
As an independent news site, SE1 has built its reputation on 'authenticity and a sense of place', something which local media in the area has struggled to do, says Hatts.
"The beat reporter covering the local patch never lasts more than 18 months. They are constantly relearning the territory. As soon as they have learned the patch then they are off. SE1 has a longer collective memory (...) There's no substitute for being on the ground," he explains.
Hearing Hatts talk about the site, there's a real sense of balance between online and offline community building. For example, SE1 delivers its monthly print edition by hand: "We do delivery ourselves, which means we cover our territory at least once a month. It's those things that give you edge."
Commercial innovation
Furthermore the site's business strategy is innovatively making use of its online and 'real world' relationships.
Running Google's advertising programme on the site accounts for half its revenue and finally allowed the site to make content pay, says Hatts.
"AdSense offers a hands off approach for advertising. It keeps some separation between editorial and sales. Used well - and it does take work on the actual integration onto the site - it can be a significant source of revenue," he says.
Elsewhere the site is using affiliate schemes, for example 'click to book' links on its special offers restaurant listings and links to buy related books on Amazon, to generate income.
Carrying such links might not be a traditional way to fund journalism, but it doesn't affect the site's editorial independence, stresses Hatts: "You're not making promises to anyone that you can't keep."
Building business links locally has included offering advertising at lower rates - £9.99 being the lowest ad price currently for a classified listing.
But SE1 can do more to exploit the local advertising market, he says.
"I know that there are lots of areas we haven't explored," says Hatts.
"There's an obvious synergy between the local sites that contribute a sense of place and the local businesses that serve that area (…) There's a real opportunity for bridging that gap between local business and local news sites."
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