Anyone who manages to raise funds has a revenue model they are sharing with prospective investors. Startups might choose not to pursue all the revenue opportunities at launch or even launch with a free product, but that doesn't mean they don't know how they could make money. Many companies choose to focus on growth for years and once they are a certain size, monetization becomes an easy problem to solve.
This is an excellent blog post from Andrew Chen that explains monetization: Stop asking "But how will they make money?"
We are now in a race for customer acquisition and winners are those companies who find the most cost-effective way to acquire and retain customers. Many industries have very low customer loyalty, so I think small companies have a chance to build brand loyalty by serving niche markets and through excellent customer service that large companies are infamous for.
One word: traction.
As long as you have a larger user base, it doesn't really matter if you make money, bleed money, or are breaking even.
A larger userbase is the hardest thing to achieve, figuring out how to make money from it is far easier in comparison.