He mentioned in the podcast that they rent a space at the data center so I assume colocate

So they'd need to hire a person to setup and manage hardware. And another person to setup and manage RDS, ES, etc.

If it's $250k each, that's already $500k. Unless they can find someone who can do both for... $300k?

I don't know.

He doesn't provide enough details to make the math work.

$250k is Sillicon Valley rate. In Europe similarly skilled people earn less than that, typically $80k.

Very important point. There are plenty of skilled people who live in places that don't require that kind of salary in order to afford a decent place to live. Why not hire a guy in Kansas to remote manage your infrastructure?

Silicon Valley culture isn't nearly so critical or valuable that your organization requires it in order to do the necessary work.

37signals pays SV rates for global staff on principle. They publish their salary information, based on job family and job level.

Even $25k if you look at small companies in southern Europe.

That's just for juniors. Seniors are more around $60K-$70K (although, it's still a low number of US standards, yeah)