While this all may be a good plan it is not the only way to go. My startup, engineyard.com is only two years old. But we built something people wanted and started selling it to them in September of 2006 with only $120k seed money raised from friends and family. We were profitable by January 2007 and had 50% growth month over month for most of 2007.

We could have just left it at that but we had plans to become an open source company as well as a hosting company. Developing new software projects like Rubinius, Merb and Vertebra take time and money to pay top notch engineers. So we decided to take a gamble on going big and we took some VC money. The thing is, we already had a profitable business and the VC's came to us, we never sought them out.

So we were able to accelerate our strategy by taking the VC money and we got excellent terms since we already had a profitable business. And we took money from Benchmark that was less then other VC's were offering us because Benchmark's contacts and knowledge has been a huge strategic advantage for us.

We have been able to grow our 3 person startup to over 80 employees worldwide, and through our VC's contacts were able to secure a series B from Amazon, NEA and Benchmark.

We would never have been able to accelerate our growth and ideas as fast as we have if we never took money. By taking money we have cemented our place in the Ruby landscape as the 800 pound gorilla ;)

So yes maybe it is the safe play to not take money and try to sell a product that people want and thats great! But sometimes it really is worth taking big risks with big money working toward big goals.

This is not an either or scenario and both ways of doing things are equally viable