Joe Kraus points out that the costs of doing a tech startup have dropped in recent years. Entrepreneurs are often able to build a product that would have required $3M of investment a few years ago using just $100k of seed capital. Jeff Clavier adds some additional thoughts.
A couple months ago, Paul Graham wrote an interesting essay, "Hiring is obsolete", about small, self-funded startups. It is also well worth reading.
Update: Don't miss Mark Fletcher's post on how he funded and built Bloglines.