I started my startup journey about 4 years back, right around the time Amazon introduced AWS. We started with a VPS and eventually moved to dedicated servers for Muziboo, completely skipping the cloud wave. We are doing the same for SupportBee. We do use S3 but we never used EC2 for hosting. However, I have worked as a consultant a couple of times in the last few years and I have worked with EC2 on client projects. I understand the benefits of cloud hosting but I don’t think that cloud is the right solution for every company. Traditional dedicated server hosting still makes a lot sense for majority of companies out there. However, before I get to that, let’s first quickly go over the benefits of cloud hosting

Architecture
Nimbus.io uses parity striping to spread data across many servers redundantly - providing bulk storage with equal reliability and less than half the overhead of replication based storage systems.

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Documentation
The API is similar to S3 or Rackspace Cloud Files - favoring JSON over XML. For easy portability, we supply libraries to use Nimbus.io as drop-in alternatives for the most popular libraries to access competing cloud storage platforms.

The server and client components are all free and open source software. The server software is made available under the AGPL license. Clients libraries are available under LGPL.

Pricing
$6 per 100GB of purchased storage. Transfer in is always free. Transfer out is $0.06/GB. PUT and LISTMATCH requests are $0.01 per 1000. Other requests are $0.01 per 10,000 or free.

PHP Cloud Hosting Platform As A Service

Integrate deployment into your existing workflow, directly from your source code repository. Autoscale up and down without any fuss. Spend more time coding, less time on sysadmin.

Aegir Mini VPS is FAST – 256MB burstable to 4GB RAM, 4 core 2GHz CPU, MariaDB with XtraDB, Pressflow Drupal core, Memcached and Redis fast caches. SSH and FTP access. Standard and custom palettes possible. Boost compatible. 8 sites. 1 GB storage. 80 GB transfer/m. Aegir UI simplified for beginners, with how-to in an easy to follow screenshots. Self Managed – a dream tool for Drupal hosting startups and design studios, easy to use and expand. 100% white-label. One our Apache Solr Search Core included free when paid yearly.

First and foremost, and this can’t be said nearly enough for all those people jumping on EC2 because it’s flexible, EC2 instances are ephemeral. That means they can and do disappear at random. If there is a hardware failure in the physical node that hosts your instance it will simply disappear, along with any data that isn’t on an EBS device; you’re supposed to account for these types of things in your application design.

That means either some kind of heartbeat / load balanced setup1 where a server that disappears is automatically removed from the rotation or some other kind of monitoring, possibly a similar heartbeat system that uses that API to immediately spin up a replacement for the missing instance2.

Choosing GAE as the platform four our project is a mistake which cost I estimate in about 15000€. Considering it's been my money, it is a "bit" painful.
GAE is not exactly comparable to Amazon, Rackspace or any of this hosting services, because it is a PaaS (Platform as a Service) rather than just a cluster of machines. This means that you just use the platform and gain scalability, high availability and all those things we want for our websites, without any other software architecture. Cool, isn't it.
You do not pay until you get a lot of traffic to your site so it sounds very appealing for a small startup. I read about this in a book called "The web success startup guide" by Bob Walsh.
So yes, everything looked cool and we decided to go with this platform a couple of months ago.
It supports Python and Django (without the ORM) which we love so we tried it out. We made a spike, kind of 'hello world' and it was easy and nice to deploy.
When we started developing features we started realizing the hard limitations imposed but the platform:

To help new AWS customers get started in the cloud, AWS is introducing a new free usage tier. Beginning November 1, new AWS customers will be able to run a free Amazon EC2 Micro Instance for a year, while also leveraging a new free usage tier for Amazon S3, Amazon Elastic Block Store, Amazon Elastic Load Balancing, and AWS data transfer. AWS’s free usage tier can be used for anything you want to run in the cloud: launch new applications, test existing applications in the cloud, or simply gain hands-on experience with AWS.