Why spend $10K on servers if you have, all things being equal, 98% chance of failing?
Most startups fail. You should be prepared to fail cheaply. You can always spend $50K on servers once you are successful. Let's say you spend $1K/month on cloud-based servers. That's quite a lot of horsepower. If you fail in 6 months, you are still $4K less broken that you would be had you spent $10K in the first place.
If you succeed, you will able to spend as much as you need in servers to keep your bases covered and still add and remove cloud-based servers to lessen your load on demand.
the problem is that the $1K/month in 'the cloud' buys you servers that would cost $4K to buy. Even I (and as far as I can tell, nobody else using Xen has lower prices) price things out so I cover my hardware in four months.
The advantage to 'cloud' stuff is that if you have servers with less than 32GiB ram, the economics of owning get much, much worse, mostly due to hosting costs. If you have tiny little servers, VPSs really are cheaper over the long term... of course, 'serious business' hosting usually requires larger servers, so we're back to saying that you save a lot of money buying if you are big.
Most startups fail. You should be prepared to fail cheaply. You can always spend $50K on servers once you are successful. Let's say you spend $1K/month on cloud-based servers. That's quite a lot of horsepower. If you fail in 6 months, you are still $4K less broken that you would be had you spent $10K in the first place.
If you succeed, you will able to spend as much as you need in servers to keep your bases covered and still add and remove cloud-based servers to lessen your load on demand.