My business (LabSlice) was just announced as a semi-finalist. I didn't even realize it was publicly announced until I clicked this link in the poster's blog: http://aws.typepad.com/aws/2010/11/aws-start-up-challenge-20....

I am just a data point, but it's worth mentioning that LabSlice has no VC funding at all, and is truly a startup (ie. the website has only been online for a month or so). So on the one hand I can attest to some success, even without serious VC backing. On the other hand I will admit to surprise that the AWS competition classifies a startup as a business with less than $10M in revenues or $10M VC funding. Sure, they may technically be a startup, but they are in a much different league to the guy in the basement.

In some ways it would be pragmatic to have a VC funded tier and a non-VC funded tier. That's the only way to differentiate businesses to give a better chance to the little guy. But in reality this is a competition that Amazon funded out of their pocket and they can call whatever rules they see fit.