There is a tremendous value add from the whole AWS package, so naturally you are going to overpay a lot if you compare on raw power alone. AWS allows you to no

There is a tremendous value add from the whole AWS package, so naturally you are going to overpay a lot if you compare on raw power alone. AWS allows you to not purchase backup hardware, it allows you to shape your stack to your load profile on demand rather than purchasing hardware and potentially making a long-term commitment that is wrong, it allows you to handle load spikes very easily and inexpensively, and it allows you control everything from a robust API, and it's big and stable enough where you don't usually have to fight for and be disappointed by support: problems tend to be large and affecting everyone, or small and you just boot a new instance. So what if you're spending $25k a year where a colo'd rack would be only $5k, that's not your major cost center in a startup (or any business for that matter). If you are utilizing the benefits of AWS it could well tip the scales in terms of not needing to have a $150k systems engineer.