Been doing it for 2 years. Funnily enough I just had a discussion on this topic with my current CTO/co-founder (I'm the business guy).

Pros:

- indeed you bill much more per hour, so in theory spend less hours.

- your work actually gets implemented, because you bill much more per hour. Generally "project management" is much better because they are buying a product and are incentivised to get a return on their investment.

- you deal with CEOs/managers as a peer, and learn (faster) from successful CEOs as a result.

- you will rapidly learn to sell. How do you differentiate yourself from the other 1,000 consulting outfits out there? How do you justify charging 5x what that Bangalore outsourcer is charging?

- it's a series of small successes that give you a boost psychologically when the product is so far away and the startup side seems not to be progressing.

- you think you're different because you're not taking money from "these risk-averse people" who "don't understand" your product. You'll get there the hard way but own everything at the end! Once this feeling becomes less important to you, you are ready for seed investment.

Cons:

- by far the biggest is the time suck, and focus suck. You're context switching constantly. My first CTO quit in part because he was consulting as well, and the product got nowhere for months because we invested too much time in our main client. This time around I'm the only one consulting, CTO is full time on the product. It's still exhausting and inefficient, and he's justifiably annoyed when I'm unable to do startup stuff because I'm focusing on clients. Client takes precedence because you cannot screw up with them, you're delivering a professional product at certain standards. The business stuff is very important, more than it looks, and so the product launches later, sales happen later, marketing happens later, etc. which hurts the company because time is also a currency, arguably your most precious. The dynamics are well depicted in the movie Primer, where one of the group is working full time to pay for the others to build their time machine experiment. Watch the group dynamics when he returns home late at night.

- at some point you'll have to cut off clients, when your startup takes off. When this happens, if you were actually good at consulting, it's going to suck for them. If you are professional and ethical, this hurts you as much if not more as it hurts them, you grow to like a good client.

- Clients quit without notice. In my case, one sold to a larger group, another ran out of money. Then you're scrambling to fill the gap and spending time doing consulting sales instead of startup sales, because cash is king.

- should probably point out: what you bill and what you do is not exactly the same. If my client wants me on site for a 1h meeting, I'll probably commute half an hour there, then have lunch with the PM afterwards, then commute back to my office - total 3 hours for 1 billable. On top of which you are now on the Manager's Schedule [1] and have important opportunity costs from not having blocks of time to yourself.

A nice parallel is when I was a student and many of my colleagues had this idea in their head that they could be "everything" - have a phenomenal career, be a helicopter parent always there for the kids, retain a cool and active social life with Facebook worthy trips. After a few years they all ended up picking one of the three, because there's only so many hours in the day, and sleep deprivation actively harms your ability to think, which is a prerequisite to making progress in at least two of the above. You can't be an MD at Goldman and know what your kid was up to at school today.

Money buys you the time to focus on the startup and that's much more valuable than it looks. Of course this comes up on HN all the time, I just wanted to add a bit of flavour and an extra data point.

[1] http://www.paulgraham.com/makersschedule.html