I've seen this work in crowdfunding models (i.e. indiegogo, kickstarter, etc) and some companies who built it themselves (Lockitron).

It can work but I believe it really depends on the innovation and the size/type of the market.

For it to work at scale (raise enough money) you need to demonstrate a future product that's remarkable (people will talk about it after they see it) or it won't have the viral aspect. Seth Godin calls this a Purple Cow.

I did build a service company by closing deals and getting 50% up front, so that I could afford to higher more people, and then sell more deals. I called it "customer financing" and it's a beautiful thing if you can make it work. The only risk is you NEED to deliver on the promise sold, or it's a ponzi scheme waiting to implode.

Hope that helps.