Thanks for your prompt reply.
Sorry for not having fully specified my config.
When writing this very post, I was going through the template for it using the link you provided and came across the question 'usb devices connect'. At this point I thought of trying starting Amiberry without having my 2 Xbox (original) controllers connected, which are in turn connected to my USB hub.
And guess what...this did the trick! Amiberry now starts fine. I'm able to reproduce the issue so this is really the problem. Disconnecting either one of the 2 controllers will also work. But 2 at the same time won't work. I'm not having any other issues with both connected at the same time. I have a 5A PSU and never seen the rainbow logo with this setup except immediately after power on (bios screen).
I hope this may help anyone else stumbling upon this in the future.