Isn't this the way companies, until fairly recently, have always been started and grown? Basically, come up with an idea/product, reach around to back pocket (or into your purse) and fund it ad-hoc. That, or take out a loan or such.
It seems like this was the way things were always done - until fairly recently. It seems like things changed sometime around the early 1990s. I tend to wonder if this had anything to do with the S&L scandals and such, plus the recession at the time? I think (maybe I'm wrong) that at that time, banks started to push credit more, and making non-mortgage loans more difficult or impossible to get (I recall my dad getting a loan from the bank to buy a car, with the house as collateral - I don't think that's even possible today).
So today, if you want to take this route, you either have to go old-school and fund it with loans from friends and family (more or less), or find some other kind of small-time investors (non-VC), or use savings, or maybe credit cards or mortgage equity. All have upsides and downsides (for the business, owner, and "investors"). But it isn't as easy any longer to go to a local bank to get a loan to start a business (you'll probably just get pushed to get a business line of credit instead).
I'm probably completely wrong about all of this, though - which is why I don't have my own business, on top of a bunch of other reasons!