The linear velocity of the wheel is the product of the wheel radius and the angular velocity (rpm's) of the wheel.

speed = wheel radius X revolutions per minute

So far cranks turning the same rpm with the same gearing, the 700c wheel will be traveling at a higher speed than the 650c wheel.

This can be overcome with gearing, which is what bikefriday does. But the root for needing to overcome this begins with the wheel size.