What's your company?
My company is actually far more capital intensive (think plumbing or dentistry) than a software firm would be. We had non-trivial fixed startup costs and our costs tend to scale up (slightly sublinearly) alongside our growth, but we still managed to bootstrap via consulting, one-off jobs, favors, and creativity. I often puzzle at why a software startup which has far lower costs than our firm would want to take outside capital.
From an entrepreneur's perspective, capital is much more suited to a firm like ours than a software company - when I look at the margins in the software industry and the small amounts of money angels invest in exchange for the equity, I think they must be laughing all the way to the bank.
The immediate example that comes to mind is "Cuil," - a search engine (large market) started by ex-googlers (great team), with $5 million investment (well-funded). It took them forever to launch (because its a hard problem), and partly because of that, they got poor PR and little traction. They've got another $25 million investment since then, and almost nothing to show for it.
Anyway I don't want to cast aspersions too much on Cuil, because they may turn out to be successful eventually. My point was that software is a hugely risky business, with massive upfront costs.
You can build stuff cheaply of course, but when you do that, you have the problem of dealing with competition - namely if you can build it cheaply, others can too.