I hear this a lot. No it does not, and it has nothing to do with the size of a team. VSS is completely broken, its integration with IDE is broken too and worst of all, it teaches you all the wrong ways of working with a source control system. If a person who
doesn't know what a SCM is starts off using VSS, she is worse off than learning a proper system from scratch.
Subversion is not panacea, it's true, there is Perforce which is very good, IIRC Microsoft used to use its fork called SourceVault internally (not VSS obviously), now presumably switched to TFS which I hear repeats VSS mistakes (the "destroy" command―people,
an SCM is supposed to _keep_ the source and allow you to rebuild it going back in time, not destroy it!) There are also distributed SCMs like git and mercurial. And there are heavyweights like ClearCase if you have tons of money and dedicated support staff.
These all are proper SCMs.
Search Google (or Live, for that matter) for "SourceSafe bugs" and you'll see what I mean.