We’re getting close to re-launching an alpha of Neighborsville.  Technically, we already launched an alpha, but we missed our mark.  We tried to do too much.  And as a result, we never “finished.”  We got a rough version up a few months ago, but we didn’t have the money to get us to a state where we were generating cashflow, and as my regular readers (Hi, Mom!) know, we didn’t have a back up source of income.

So we decided to bootstrap.  Since about October, we’ve been focusing most of our energy on our development company, Koombea, building web apps for clients.  We’ve grown from a five man shop back a few months ago to an eleven person operation and we’re out hiring more developers.  Our biggest challenge has been too much work, which is a good problem to have.  We’re getting the bills paid again, which is greatly appreciated by my wife.

We’ve moved Neighborsville to a “nights and weekends” project.  And we’ve completely rethunk it.  One of the great things about getting something up early that wasn’t right was that it gave us a great opportunity to evaluate what worked and what didn’t.  What didn’t work is that we missed the concept of a minimum viable product and tried to launch everything all at once.  As a result, we didn’t really end up launching much of anything.  We’re going to be relaunching a new alpha later this month that we think really gets to the core of what we’re trying to do for neighborhoods. By focusing on the core, we’ll be able to get a product out into the wild and build from there.

Another Gay Sequel: Gays Gone Wild! rip

Blues Brothers 2000 movie

Proof of Life trailer

I’ll save all the product details for a later post, but what’s been most interesting for us is the process of funding our venture.  We raised a bit from friends and family to get things off the ground, but it was nowhere near enough to sustain us to the point where we’d be generating cash.  Our original thought was that we’d go raise a seed round and then by now, we’d be shopping for an A round.  (Just to save you the trouble–if that’s your current plan, ditch it.  It won’t work.  You just need to build something.)

Along the way, we’ve met a few people who have been interested in investing.  But once we realized what we could do on our own, we’ve been seriously reconsidering taking any money at all.  Right now, we don’t need it.  If we did take some money now, it would be a nice accelerant.  It would allow us to shift some of our guys from client work to our own project and would certainly speed things up, but at what cost?

Over the past few months, I’ve gotten to know the guys over at 12seconds.tv.  It’s a simple idea–video twitter.  You record 12 second videos.  Not 13 seconds, or 11 seconds, just 12 seconds.  They have taken $0 in VC money.  They all have second jobs.  And this month, Compete.com shows them having more uniques than the 800 lb. gorilla in the video discussion space, Seesmic.  Seesmic has 13 employees and $12 MILLION in VC funding.  Seesmic also went through layoffs last year when the VCs all started panicking and telling their CEOs to rein things in.  12seconds, without a dime of VC money, avoided all of that drama and just kept focusing on building their product.  Their growth is headed up and to the right while Seesmic appears to have been shrinking.*

Which brings me to my question:  Can being broke be a competitive advantage?  When you’ve got money, it’s easy to get distracted because you can afford to chase the random ideas.  When you’re broke, you have to focus on what’s core, or you don’t get to pay the mortgage.  When you’ve got money, mistakes don’t cost you as much.  When you’re broke, screwing something up is a big deal–you learn quickly and fix things even quicker.  When you’ve got money, you tend to spend it on fancy stuff like travel and conferences.  When you’re broke, every last dollar goes straight to your business, your product, and your idea.

We used to think that we needed someone else’s money to get Neighborsville off the ground.  But by really stepping back and focusing on what the core of our product is, we’re going to be able to launch without it.  It helps that our other business is generating enough cash now to get us by.

By not having money, we’ve become more efficient and more focused which is only going to help us in the long run.  Now, this doesn’t mean that we’re not going to try to raise some money.  We want to get a few guys working full time and accelerate our launch.  We’re exploring a few options currently to see what would work best for us, but by not needing to take money, we’ve given ourselves options on how we want to manage our business.  Being broke has made us smarter, faster, and more efficient.

What do you think?  Can being broke give you a competitive advantage?  Do you need to take money to be successful?

*If Loic happens to stop by to question these numbers, I concede that all I’ve got to go off is the Compete chart, which is not exactly authoritative, and Seesmic surely gets a ton of interaction away from it’s main website such as video comments on Techcrunch and through their Twhirl client.  The point is that 12seconds is doing just as much if not more with a LOT less in the bank.