But let's not pretend that the little guy wants to go public. If they do, they are naive. Out of all of the companies, that YC has invested in, maybe 5 have actually gone public. Every startup knows the game is to get acquired.
The fact is that some things need scale to succeed. OpenAI for instance was never going to be able to afford the compute it needed without being subsidized by MS.
Both companies had a first mover advantage by deploying a more scaleable technical innovation in a somewhat stealthy way. OpenAI is subsidized as you say, but StabilityAI promptly ate their lunch int he image production field and is hoping to do the same with LLMs.
A "successful" business makes more than it spends so it can be an ongoing concern. Any company can sell a lot of dollars for 95 cents. Youtube was never a "successful" business with a meaningful revenue stream before being acquired by Google.
> Or how did Google come to exist, when the market was dominated by (then-) huge firms like Yahoo, Lycos, and Altavista?
You realize you're arguing against the need for government regulation. This is the market working as it should. But Google became a success initially because Yahoo used it as their "search engine". Google initially offered to be bought up by Yahoo and Yahoo balked at the price. Google wasn't trying to go it alone.
And who was going to fund them?
Your argument is valid, but scale matters. Think of a game of Monopoly; you can usually tell who's going to win well before the game concludes, and you can guess which players will lose well before that.