The reality though is that most of the companies who take the money end up just giving most of it to Google or whoever and then going bankrupt 18 months later. At this point I think society would probably be better off if raising VC funding was banned for early stage SaaS startups since it's really just a form of dumping, but at least much of the damage is eventually self correcting.
More common to over-hire, I think. Server costs tend to scale well with your customer base.
But gp was talking about hiring persons, not servers. Advertising can be scaled back much easier than over-hiring. Even if almost everybody is fired again, the inefficiencies that established themselves during the headcount glut can usually not be unlearned again.
They used to, when they were your servers. Now that they're AWS's server, there can be a 10x price premium, which amplifies the problem introduced by provisioning for scalability at all costs.
When it's nobody's job to worry about costs, it's very easy for them to tend to balloon out of control. Of course, there's not much point in worrying about a $1M cloud bill with $100M in the bank.