The ongoing TCO of AWS is much higher than Linode, of course. But that's precisely my point: you want to capture customers at birth, incubate them into adulthood, and then charge them a lot of money now that they can afford it.
You also want to avoid scammers and fly by night operations that don't value your business other than to find cheap CPU and bandwidth. There is a set level of overhead for each new customer, and new customers are probably more likely to need additional support. The lower you go with pricing, the larger this portion of your costs eats into your profits.
There are $10 VPS solutions out there, but their poor reputations lends credence to the idea that $10 VPS solutions are not where the money is at.