The idea here is that for many people, maintaining a Linux instance on which to run Sandstorm just isn't feasible. It's too expensive (you don't really need a whole VM just for yourself), requires sysadmin expertise, and is time-consuming. So for those people who don't want to do all that, the next-best option seems to be to get a cheap managed instance from someone else -- maybe the Sandstorm group, or maybe a friend.
I don't want Sandstorm to be something that only developers and Linux sysadmins are able to use, even if the early adopters are likely to be mostly from these groups.
Another option might be to sell physical devices pre-loaded with Sandstorm, although speaking for myself I really do want my cloud services to be in "The Cloud", not on my home network.
In any case, I want to make it as easy as possible to transition from a managed instance to a self-run instance, so if you ever decide you don't trust your host anymore (whether that host is us or someone else), you can easily leave. That's definitely not something you can do with most web apps today, even with Google Takeout and whatnot, because they don't let you transfer the software that makes the data useful.
Bottom line, the pieces needed to run your own personal instance will always remain open source. But not everyone actually wants to do that.
Also, a VPS is only $5/month so sharing one among several users seems like a premature optimization.
Ultimately, as a Linux-based project, Sandstorm cannot really save you from the complication of installing Linux itself, or keeping it running and updated, or making backups. It just saves you the complication of installing and configuring individual apps. So the "managed instances" service is appropriate for people who don't even want to manage a Linux instance at all.
To imagine the Cadillac product: double as a WiFi router and put a small cellphone screen on the thing. The screen gets rid of the admin setup bootstrapping pain - the screen is default admin user. Making it a wifi router lets you consolidate your initial configuration into just two questions: a name for the network and a password. Name becomes ssid, shared login, dyndns name, etc. Password becomes remote shared login password, WiFi password, etc. Admin panel can create other admin or regular users, also having a screen right on the device would be convenient for backups - just plug in the detachable storage and the backup wizard begins.
I've given this way too much thought. I just want a zero-config device.