I think it limits the reach of the group. Obviously, with less people means less ties to outside sources. Limited resources first comes to my mind when thinking of the downsides of groups in which everyone knows everyone. Another downside would I would choose to mention would be slowing of the development of communication skills. The more comfortable people are with one another, the less traditional the use of language becomes. If people in a small group only communicate with one another, I think their communication skills may be hindered because of the lack of a need to interact with new people and new ideas.