If they have a better product, so be it. But I'm not convinced that more engineers and more R&D necessarily lead to that, nor am I convinced that smaller, more niche products are always choked out. If that were the case, we'd only have huge companies and a bunch of choked out entrepreneurs. Rather, a bunch of us out here with small companies are doing just fine. Definitely not a give up situation like "we just can't compete". That mentality gives rise to nuclear options with unintended consequences.
This is very true. I have been a paying customer of Fastmail for many years, and in my opinion, they are the best in the industry and very small to boot.
OpenBSD is yet another example of a small(ish) team of people making some truly great software. On the Windows side, Fookes Software comes to mind, again small operation, great software.