$140 for a second gen i5 and 8GB of ram is pretty reasonable.
A $20 VPS is only for pet projects. For a startup it's worth it to invest in a/some dedicated server(s). Having some redundant firepower of dedicated servers so that you don't have to worry about the upgrades for a while presents a sweet spot between saving cost and scalability.
I pay about $3 per month for a very low-end xen VPS. Sure, I'm not running anything at all resource intensive on it.. but if I was maybe I'd spring for a higher-end VPS for $6, or if I really wanted to get crazy I'd find a really solid one for about $20 a month.
At $140-$190 a month, you'd better be getting a bunch of high-end dedicated servers and fantastic support, or you are getting seriously ripped off.
Hell, given the very modest needs of most small startups, having to shell out even $20 a month is a ripoff.