1) This is just what happens when an industry matures. If you want to start a new company to drill oil wells, you're going to spend a lot of money. Same if you're starting a new railroad, a new car company, a new movie studio...
2) Speaking of VPSes and web 1.0 in the same breath is a little anachronistic. Servers had much lower capacity in 1999, and cost much more. Sun was a billion dollar company during the bubble because it was selling tens of thousands of unix servers to startups in order to handle the traffic load. Google got a lot of press because they were the oddballs who ran on commodity x86 hardware.
2) Speaking of VPSes and web 1.0 in the same breath is a little anachronistic. Servers had much lower capacity in 1999, and cost much more. Sun was a billion dollar company during the bubble because it was selling tens of thousands of unix servers to startups in order to handle the traffic load. Google got a lot of press because they were the oddballs who ran on commodity x86 hardware.