[thegoodlab]

Most do.

37Signals, Pivotal, Zurb are great examples of companies who have transitioned from client based to product, or are currently doing both.

I'm a freelance developer and based on my situation and those of my peers, everyone is working on side projects. The reason I choose to consult and have clients is because it lets me be my own boss and create a business doing other people's (clients) work. I can craft and hone my skills doing client work, while always brainstorming an idea or product to launch in my spare time. When the moment strikes I will already have all the resources and knowledge available to make a great stab at the startup scene.