Your own pay is far from the only thing you spend money on in game development....
yes im aware they probably paid for studios to do animations with, but they seemed to be developing their own engine, and doing near all the work themselves. So in the end, i still cant see say a 5 man team, who bought brand new pc's and paid a studio for like 20 hrs(guessing) of work going broke with 500k and only being in the completely early stages of development still. To me it just doesnt sound like dedication, it sounds like a half ass attempt at making alot of money very quickly, then asking for even more.
Before you say well all games cost alot to develop, most of the large titled games have studios with manpower nearing the hundreds(alot of paychecks, pc's, and a large studio rent), and can develop games in near a year or two. But those also come with the price of quality and development that backs up the large cost of production by making millions. IE go take a look at GTA5, game is breaking records.