Why should it try and compete? They don't have the money, true, but so what?
Did the people who wrote Narbaculer Drop have much money? Nope, did they create an awesome game that got picked up and remade as a hugely succesful commercial product? Yep.
Tried World of Goo yet? That was low budget, almost certainly less graphically pretty than would have been the case if they'd had more cash, but the game is a commercial success.
Good graphics and funding won't create good ideas. For that you need a passion for the subject, artistic ability and lots of experience with games in general.
Possibly the guys writing it may be getting more out of the experience then the people who play it, but thats because they are also getting exactly the skillset that would put them in a good position to apply for positions at games development companies.