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What's the alternative, replicate everything in-house/self hosted?

Erm... Yes? You write that as if hosting your own repository is somehow a foolish or implausible thing to do.

Should startup stop using third party service providers?

Stop? Maybe, maybe not, it obviously depends on the circumstances.

Stop relying on them without a back-up plan? Absolutely. If you can't run your essential systems without GitHub, or any other third party system that isn't under your direct control, then you need better contingency planning.

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