As a musician myself, I can 100% confirm this. For me personally, small gigs are often the most fun because the audience is very close and you can actually see/hear the reaction of individual people. Noticing one or two excited audience members can already make a difference. Conversely, a Jazz musician once told me that seeing me in the front row, visibly enjoying his performance, fired him up. Also, in a small venue it is much easier to hang out with the audience after the concert.

One of the most fun gigs I had was a garage concert at a friend's place in Luxembourg we did on our way to a festival. The fact that weed had just been legalized in Luxembourg certainly contributed to a very receptive and enthusiastic audience. We ended up repeating our whole set :-D