Using consulting to bootstrap your software startup

I've been through some pretty brutal experiences recently with venture capitalists and I'm looking into ways I can start a company without VC money.

Has anyone out there used consulting to bootstrap their company? What are some of the pitfalls that I can avoid?

I think vast number of entrepreneurs are doing that, including my own company.

I think the biggest pitfall is the being stuck in consultation hell, get comfortable and forget that building great products to generate recurring revenue is the way out.

Giff Constable wrote a fantastic blog post on exactly this subject.

Yes it's possible, but few companies actually make the transition from consulting to products. Read that post for the pitfalls; if you know them and act accordingly I think it's a great way to build a business.

Not spending enough time on the product because the billable hours are paying the bills.

Clients have different expectations when they are paying you by the hour/project than when they are buying your software. You'll have to say no a lot more when selling software.

Providing support to clients with different hardware, software, levels of ability, and time zone differences. Selling B2B may not be as much of a problem.

Focusing on too many markets/industries. In consulting you can rely on the client providing more of the business/domain knowledge and usually they're more willing offer it.

Focus your consulting in the same niche as your end product -- then the two worlds will cross-pollinate, you'll be making the right connections with your consulting, etc.

If you have a product idea to start and you know that is the end goal, then you are a lot better off than someone who starts consulting with the general premise of starting some recurring income type products later.

Personally making a business out of consulting sounds somewhat deadly and not much better than having a day job, though I know some people love that kind of work.

My path:

1. Create web based software in specific niche
2. Release software with less initial pick-up than I liked
3. Get a real job
4. Started making some sales for the service from step #1
5. Found a big consulting gig (in same niche as product.. got this consulting gig because of the work I was doing on the original product) that allowed me to quit my job
6. Gradually built sales for my product from step #1 so by the time the consulting gig died out, the sales of my product was enough to pay bills and a little bit left over for me
7. Keep growing sales of product

That's what I'm doing now - I've found it helps me to prioritize tasks and time.