But smallsat launchers only make sense if they have a lower cost/kg (unlikely vs the F9) or if they're being used for an orbit/launch time that doesn't have enough demand for a rideshare. And if the space launch market gets big enough to support 100 smallsat launchers, a F9 rideshare into that special orbit will probably have enough takers to make it cheaper than the smallsat launcher would have.

Smaller diameter rockets have a much worse fuel ratio (because of fuel tank geometry issues), so there’s no way they’ll ever be cheaper than larger rockets. They fundamentally must use more fuel per kg of payload than large rockets because fuel tank wet mass to dry mass ratio increases linearly with diameter.

Right, and that's why smallsat launchers are only really viable for orbits/launches that can't be served by rideshares. Better to pay $5mil for an Electron to launch your smallsat than to book an entire Falcon 9, even if the $/kg is far higher.

Companies like Momentus [1] are happy to sell you a tug that will turn a rideshare to a common orbit into your unusual orbit.

SpaceX's rate for an Electron-sized payload is 1/6 the price of an Electron.

1: https://momentus.space/

I have to say, 5 km/s delta v is more than I was expecting from a tug like that. Still, I really wouldn't be surprised if adding one of those to your smallsat would cost more than $5m.