Ask YC: Where does vc money go?

I'm looking at starting to develop a web-based service in my off time. One thing I'm wondering is: where exactly does the money VC's provide go? The reason I ask is I'm planning on developing in my off time (usually only sleep 4-5 hours a night anyway so even with a dayjob I'll have a decent amount of time at least to start out.) so I won't need to support myself with investment money or anything. So what DO I need money for? Where do all those millions actually go? I'm having a hard time conceiving a situation where I would need to spend anything of that order. Advertising? Hiring additional coders? Hosting? If I'm just a 3-person outfit working in our free time where am I going to start incurring these huge hard costs?