Shared Virtual vs Dedicated vs Colocated server hosting - which do you use for your startup?

Classic "that depends" question there. I'd suggesting going to http://www.webhostingtalk.com/ and doing some searching. You'll see some wide ranging opinions on Dedicated vs. Colo vs. VPS.

Go there for an hour or so, ask around. It's mostly a hangout for infrastructure dudes but you'll still learn quite a bit.

Related: What's a provider that can give me lots of CPU time when I can no longer host CPU intensive processes from my home computers? What about for cost less than a dedicated server?

Unless you have money to burn, I would definitely recommend against hosting at a colo.

At the last startup I worked at we had no end of fiascoes regarding our colos. The startup bought over a million dollars of servers and then was paying high-priced employees and consultants to set them up at a colo. But then once the servers were all set up, the colo discovered that they didn't have enough power for our servers. Then we had trouble getting out of the big colo contract that we had signed and had to move all the servers and get them set up at yet another colo. Turns out the next colo also didn't have enough power for our setup even after many reassurances at the beginning that they did. So all in all, this waste of resources put us months behind schedule. Then, ironically we got acquired and no longer even needed our setup because we could then just use the bigger company's server setup.

This is another case of 'premature optimization is the root of all evil'. Seriously, we could have done the whole startup with a couple of Dreamhost accounts and launched earlier with a better product and with WAY (millions) more money in the bank. They were optimizing our server setup for HUGE traffic when they should have just been focused on the product.

I'm glad I was able to see those mistakes close up. It gave me confidence to do my own startup self-funded since I knew how low I could keep my burn-rate.

So now, I'm using EC2 for my servers and it's an amazing experience. I set up a custom server image and then can run multiple instances of it for only 10 cents per server per hour. I can kill instances that I'm not using and bring up a new server within 2 minutes. My server bill is less than $50 a month during development and will be about $100 a month once I launch. I'll also have the ability to scale up VERY quickly and cheaply if I need to.

Anyway, that's my take on it from my limited experience. I'm sure there are some guys that are obsessed with doing their own custom server setup at a colo. Good for them. But you have to realize that you'll have much higher capital costs up front and will be exposing yourself to much greater risk. Focus on your product and find a server solution that is cheap, low-risk, and flexible. Remember you can always scale later - but you have to have a reason to scale first! Have the faith to focus on product and don't fall into the trap of an 'intriguing' 'interesting' academic experiment in server setups!

I recommend doing a Technorati search on that. Lots of people have received less than reliable service on the Grid. They do great marketing, but their tech is overrated from I've been reading.

I'm ok with running my own machine, so I have a dedicated box from Layered Tech that's not too expensive, and has a gig of memory and hardware raid. One thing you can do with a box like this is, while you're ramping up and don't use the full capacity, share it with a friend.