To counter your hypothetical "can't be done", here's a real example of a product company that's grown a single person selling electronics kits from their college dorm room to a product company making $33 million in revenue less than 10 years later:
A similar example being this product company, which started out in 2012 with two people and a laser cutter, growing to a product company that employs 30+ people within the space of 5 years:
thanks @ZenoArrow ... additionally, it's over $42m and we have a free and paid for service, http://www.adafruit.io and a subscription service, ADABOX, with thousands of customers, http://www.adabox.com ... no loans, no VC, 114+ people, USA manufacturer of open-source hardware in NYC, USA.
So they started out as hardware product companies.. and remained hardware product companies. I don't see any examples of software services companies transitioning to product.
Who said anything about software service companies? I said design agency, which is not the same thing as a software service company. Sure, they use software to do their job, but that's not the most important part of what they do.
As for examples of design consultancies morphing into manufacturing companies, Cambridge Audio is one such example:
https://www.adafruit.com/
https://en.wikipedia.org/wiki/Adafruit_Industries#History
A similar example being this product company, which started out in 2012 with two people and a laser cutter, growing to a product company that employs 30+ people within the space of 5 years:
https://shop.pimoroni.com/
https://shop.pimoroni.com/pages/about-us