Richard Sheridan spent 18 years at Interface Systems, an Ann Arbor, Mich. company that translated documents to the Web. As vice president of software development, managing 36 software engineers, he was bringing home a six-figure salary. "It was a very comfortable existence with great vacation and benefits and loads of stock [options] that were going to pay off big someday," recalls Sheridan, now 45.

In January 2001 Sheridan's luck swiftly turned. He was ordered to fire half his staff. "You might as well have told me to go out and shoot some of my friends," he says. Three months later he took a bullet himself; his boss delivered the bad news over the phone.

Sheridan contacted headhunters and prospective employers and got what he expected: no bites. Getting in touch with Thomas Meloche, a onetime colleague, Sheridan decided to start his own business. Along with two other software consultants, they met for 12 hours at a stretch in Sheridan's basement, hashing out how much each would invest ($25,000 apiece from savings) and how long they could afford to work without an income (up to a year).