I don't think a server is bound to close because of being small or big necessarily, but I think that the average person is more likely to overestimate their capacity to run a server for a lot of people. I'm no expert, but I imagine the cost a reddit-like server that is open to the public can only go up over time. Unless you delete content periodically on purpose, and especially if you allow users to post images, audio or video.

I can picture someone (understandably) creating a server with good intentions and then after 2 months saying "guys, I didn't think it would cost this much. And I also need to focus more on work/university so the server will close. You have 3 days to move."

It's not like I trust that the developers will have infinite resources, but that they will know what to do to avoid something like that or even take other measures if they know they are reaching a limit. For example, limiting the amount of people that join while they upgrade the servers may be one way to do that (although I don't know if that's what they are doing).

As for the server running smoothly, I had a couple of small issues in the little time I've been trying to use lemmy, but I assumed they were because of the whole project still being in development rather than a server problem.