(FORTUNE Small Business) – Tell me you don't find this story utterly irresistible: At five on a frigid November morning, Keith Anderson gathered a group of his neighborhood friends to help him launch what turned out to be a telecom company. "At first they thought I was kidding, but then they dragged themselves out of bed to do it," recalls Anderson, who dubbed the project the back-fence network. "Everybody else told us we were crazy. But when everybody saw what we had done, they all wanted in on it."

What the group had done was wire seven homes in their rural community of Springville, Utah (pop. 21,000), with ultrafast Internet connections, using special weatherproof switches Anderson had built. With cable curled along their back fences, the close-knit neighbors could soon play games and share files. Some even set up videoconferencing equipment in their kitchens so they could chat while completing tasks like cooking.

About six months into it, in April 1998, Anderson got a call from a fellow named Craig Miller, who asked if he could invest. "Invest in what?" Anderson recalls thinking. "That was the first time it dawned on me that this was a business." Says Miller, who worked with one of Anderson's neighbors: "I saw that they had a really great thing. I could see the big picture of where it could go."

Part of what Miller responded to was the birth legend surrounding the company Anderson had inadvertently started, now named SwitchPoint Networks. During the dot-com boom, every money-hungry entrepreneur told a tale about how capturing a specific set of eyeballs would somehow yield untold rewards. Those stories too often turned out to be science fiction. These days the most appealing and effective startup stories are--like the top-rated TV shows--based on reality. A distinguishing narrative can serve as a potent lure, especially in a dim economy. Humans--and let's generously include investor types in that category--are always drawn to stories of others beating great odds, bucking the system, and maybe even making payroll.

As Switchpoint's story spread, via word of mouth and local newspapers, "we became heroes to nerds," says Matt Newman, a former employee who drove a van emblazoned with the company name. "People would run after me or gesture at me to roll down the window while I was going 70 miles an hour." To date, SwitchPoint has raised $37 million. Its investors have included Omninet Capital, whose CEO, Qualcomm co-founder Neil Kadisha, formerly served as CEO and chairman of SwitchPoint, which licenses its technology for delivering high-speed Internet access. Now based in Denver, the 33-employee company is in "restart mode, and we don't have any revenues," according to Bill Beans Jr., the 37-year-old who became CEO last October.

Beans previously served as president and chief operating officer of ICG Communications, a telecom provider that filed for bankruptcy in 2000. Still a director of ICG, he decided to join SwitchPoint because--well, there's the story of its founding. "This company started as a grassroots fix to an issue in a community," he says. "It wasn't a manufactured need, and it wasn't just some MBA's business plan. This grew from someone's real desire to build something."

According to Beans, that desire should reap at least $2.5 million in revenues next year. "What set us apart is that we started this business by going out and doing something," says Anderson, 35, now chief technology officer. And that startup story has done more than just simply resonate with a few folks. It's actually kept the company alive.