This wouldn't have been enough to save them, but if your AWS bill is $35,000/month, it's likely much cheaper to buy (or even lease) hardware and co-locate -- even if you factor in making 1-2 new hires to support the hardware.
They were making enough money to pay the AWS bill; it was the salaries that were too much. They were profitable per-user, they just didn't have enough users.
(by 'much' I mean volume, not amount. Developers are expensive.)
I'm guessing they just didn't care, because they were VC backed, and didn't understand that 2M is not that much money if you have 6 people and a storage-based hosting service.
You underestimate the costs associated with hardware. Multiple locations, redundant tier 1 pipes, 1-2 new hires per location, etc. While you can save some money, it isn't as much as you'd think.
