I don't understand this at all. How did the 4 year development cycle of Fez get funded, if not out of Microsoft's pockets? I don't think Fish & Co. were bootstrapping it. If anyone has insight into Polytron's financial situation, I'd be interested to hear it.
In "Indie Game: The Movie" he mentions that their initial funding came (partly?) from a grant from the Canadian government, to promote creative development etc. What happened after that ran out I don't know.