[dnu]

Using EC2 also takes away a part of the risk. If your startup fails in a year, then you don't get stuck in the end with a pile of hardware (for which you paid big bucks).

I guess that the best would be to use EC2 in the beginning, when you don't really know how much hardware you need, and later on use EC2 only for demand spikes.

[phaefele]

Yes - this is what we are doing. With this 4x cost differential however, we calculated that it takes only 6-8 months to have the hardware pay for itself, so if you plan to be in business in that time frame you are better of buying.