I disagree with your findings. Sure it's cheap, but hosting companies tend to oversell this virtual boxes to people and performance is not the same, especially when it comes to disk I/O (any kind of I/O) and handling sudden CPU usage spikes.

$1,200-$1,600 for a server is not expensive. If you are trying to start up a company and you're an engineer yourself, that money is what? Your half week salary? Or we're talking about running things from a dorm room here?

You make very good point about reliability though.