So how do ramen profitable companies and "Italian restaurants on the web" (ie. Small self-funded companies that fit a hugely profitable niche) fit your world view?
They (37s, fogcreek, etc.) did start as consulting businesses and raised little or no outside capital to build immensely profitable products...
They can work but generally they tend to be service companies for a long time before they become product companies. However, they're almost never done by part-timers. Even 37S and FogCreek are full-time labors of love. Also, there are always exceptions - I'm talking about mass statistics / average web startups - stuff similar to most YC companies.
They (37s, fogcreek, etc.) did start as consulting businesses and raised little or no outside capital to build immensely profitable products...