Your CTO is correct. Generally speaking you start building using the path that can deliver value the fastest to customers. This is usually something like Heroku. At some point you run into platform limitations and have to migrate to another platform. Generally this would be AWS or some other cloud. Eventually you outgrow the cloud provider and go into a data center. By that point you’re talking number of racks vs VMs.

Another thing to consider, as a developer, is how to make your app as independent from vendor requirements. For example, if you build an app in such a way that it only works using SQS you’ll run into issues down the road.

Also, why y’all using dedicated dev VMs? IMHO it sounds like there are other issues to solve before you migrate the app somewhere else. If I was in your position I would work on making the app easier to setup and deploy. Your CTO has a lot to consider and being a CTO at a startup isn’t an easy thing. How long does it take to deliver a feature to customers? How can you help speed that up? What are the engineering goals of the CTO and how can you help with those goals? Make his or her life easier and work with them. Continuing to push an issue like this will cause you frustration and make your CTO dismissive of your ideas and suggestions in the future.