Wow that's terrible business advice. Glad it worked out anyways.
Before Half-Life released in 1998, you can find tons of examples of successful game companies who cut their teeth on projects with smaller scopes while they ramled up to greatness. Naughty Dog had Math Jam, Keef the Thief, Rings of Power, and other before they made Crash Bandicoot. Gamefreak had Smart Ball, Puleseman, and other before they made Pokemon.
Even later on- Bastion was a solid first title from Supergiant, but they slowly got bigger and better until they won awards with Hades.