Exceptions could be companies like 37signals, which develop their own proprietary products. Successful ones seem to be rare.
It seems many dev shops are going this route. So if you have the capital, wouldn't it be smarter to start with product development?
> In the beginning of a company, there is no management. This actually works really well. Before 20 and 25 employees, most companies are structured with everyone reporting to founder. It's totally flat. That's really good. That's what you want because at that stage, it's the optimal structure for productivity.
> What tricks people is when lack of structure fails, it fails all at once. What works totally fine at 20 employees is disastrous at 30.
This is pure speculation, but I can imagine that this limits the size of many companies. Most web dev agencies I'm aware of weren't founded as hyper-growth startups that are willing to push through that barrier.
According to their site, their headcount is 528 developers and 52 dogs.