AWS is incredibly convenient, but it's priced at a premium. The main cost liability to building on AWS is the cost of bandwidth is insane, 5X the cost of DigitalOcean or Linode, 10X the cost of co-location.
Of course this depends on the type of startup you are building, a video startup is gonna be crazy expensive on AWS, Non-media heavy SAAS it may not matter.
Of course you can always build on AWS and place a caching layer in front of your bandwidth heavy media using DigitalOcean boxes to save big.
I agree, the AWS free tier is incredible for getting a project off the ground. For a side project of mine, I'm spending a little over $10/mo on AWS:
- 2x 1GB instances (one free, one $10/mo)
- Free ELB to load-balance between them
- Free 1GB Postgres RDS
Then I spend less than a buck or two a month when I spin up a c4.large for a few minutes to compile a new AMI periodically. This would all cost at least 3-4x on something like Linode or Digital Ocean.
[1] https://aws.amazon.com/free/