Yes, they seem to be doing the right thing, keeping it low key and low budget from the start and build slowly and methodically.
But I say it again, don't rule out opensim. Yes, Avination and Inworldz collapsed but both had serious flaws built into them right from the start. There are other grids that have much stronger foundations.
Kitely is of course the most obvious example. They've followed a strategy similar to Sinespace's and they've been doing it for 11 years. They don't have nearly as many people as SL but they are actually bigger in land area and, perhaps jsut as important, they have more sims paid for by customers than SL does.
Then there are all those small non-commercial grids. Each of them doesn't matter much but combined they are significant.