No one's calibrating their prototype roll-out according to how big or small they think they're going to be. That'd be a bit like turning down a soap commercial because it'll be embarrassing when you join the MCU, although to be fair, an unknown Gwyneth Paltrow did turn down "Cool as Ice" (1991).
I don't think that statement is true at all. My impression (mostly from being a long-time reader of HN) is that VC's are primarily/only interested in investing in startups that have some chance of becoming billion dollar unicorns, so if you're looking to get VC funds you pretty much have to set your goals at that level. Some little web app with 10000 paying customers will never get you there, but it might be enough to make a decent living.