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Thanks for the answers folks. My roommate is talking about needing tens of thousands of dollars of servers for a company he's thinking about starting and and my immediate thought was "why?" I just got my first EC2 instance up and running from the terminal in OS X so I'm doing my little happy dance. Thanks for the help.

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yeah go with EC2 first... get users... and more users... until EC2 doesn't cut it... then turn the virtual machines into dedicated servers somewhere. Truth is you'd have to spend tens of thousands of dollars to get the reliability amazon should be selling you for much less.

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