This was a big one for us too, which is why we did half and half. We contracted enough to get by, but also spent a lot of time working on our own projects on the side. What eventually happened though is the contract work slowly took over most of what we were doing. It's hard to strike a balance here.
I tried that too and found it useless. The product work got starved and ended up receiving far less than the half that was supposed to be its share. But I admit to sucking completely at divided focus.
This, but more specifically for me, writing code for features that you find utterly repugnant.
This happens everywhere where clowns have the money, unfortunately.