It seems that for a large Lemmy instance to be sustainabile long term (especially at the level of traffic reddit sees) it requires ads and/or raising enough donations like Wikipedia https://sh.itjust.works/post/1948942
Keep in mind that with the way the ActivityPub protocol was designed, more small instances end up taking up more resources and are more costly to run overall than larger ones.
Resource requirements scale with number of instances, not number of users.