Gamasutra recently released the conclusion to their two-part interview with John Baez, whose company The Behemoth created the 2D title Alien Hominid.
The interview largely focuses on how a small, naive start-up was able to "make it" (albeit still without making a profit) and the lessons they learned. They have even been able to make distributed development work - with two offices, and even individual developers, on opposite sides of the country.
It's an interesting contrast to the current "small companies don't have a chance in hell" talk that is currently floating around. Admittedly, The Behemoth serves a largely niche market, but they're fine with that. And they're still paying salaries. A company has gone alone, taken a title that no one wanted to touch, written it with decentralized developers, and published a title to the PS2, GameCube and 360. They also have merchandising to go along with it, banking on some very original intellectual property.