I don’t think anyone is saying that VPS and dedicated server providers aren’t an option. Rather, most startups rule them out since, if you grow enough to where the administration control of the Cloud is warranted, that past decision now warrants a host migration and the month+ of planning that goes into that. Unless the company really started as a side-project whose main funding was extra cash from the founder, it doesn’t make sense to artificially limit your growth.

Once more, it’s not like AWS is absolutely nothing. Chances are that any web-based startup would indeed be able to take advantage of the many autoscale-as-a-service features of AWS, enabling them to handle the next quarterly 100x increase in customers and throughout.