I'm a 'bit' investor (angel round) in a small startup that has been doing both, a product and a service.<p>There is a really nice synergy between the two happening there. The product functions as the ice breaker, the services come after.<p>It saves them a ton on marketing costs for their services division, basically the customers come to them, find out what a nice little company it is and then decide to trade 'up'.<p>--<p>edit: In general I think this is bad advice, small startups that do only 'one thing' and are not willing to move where the money is tend to die out rather quickly.<p>It often doesn't really matter what brings in the $ to stay afloat, as long as you are clear about where you want to be.<p>If consulting or fixed price jobs are what keeps you in business long enough to get a solid product or if you use a product as the door opener to sell more services, as long as you don't let the interests in the one conflict with the other you should be in good shape.<p>Much better shape than those that only have a product or only do contract work. Ideally you need three legs to stand on, so three products, preferably aimed at different markets, or a services division that you can use to pick up the slack.<p>Just a single product or just contracting is asking for trouble, and contracting with only a single large customer to bring in more than 40% of your total income stream is really playing Russian roulette.