Privacy policies are one of those convenience things. If you don't have to write one yourself and outsourcing it saves precious time and money, great. However, if you do, it's hardly the end of the world: it's going to take you a few hours to write at most and not a huge amount of money for a lawyer to review it.
You're hardly going to wait around to launch your entire project because someone didn't want to let you use their pet social experiment^W^Wprivacy policy generator tool. Moreover, there are plenty of free alternatives from reputable sources already available[1] if you just want something to make sure you're covered legally and need it Right Now. And of course, once you've done one, chances are you know enough to do any future ones yourself anyway.
My guess is that if these guys really do only have 200 or so active users but 2,700 or so on their waiting list, they are blowing a massive opportunity and going to waste most of those 2,700 by missing the train. Their service is a quick-and-easy thing, and they are making it hard. I notice that the one thing obviously missing from their "Launch by the numbers" summary is an indication of whether all those numbers are worth any real money.
[1] For example, in the UK, Business Link provide this sample:
http://www.businesslink.gov.uk/bdotg/action/detail?itemId=10...