In general this makes sense to me, especially around liquidity preferences, but I think it ignores how little risk many early employees are taking. Lots of early stage start ups are so well funded that the classic archetype of “take huge paycut because you believe in the vision” is far less prevalent.

Start ups salaries are often quite high compared to nearly any other industry. And if the whole thing does explode, especially as an engineer (who make up the bulk of early hires) there’s no real impact on your career. Go to yahoo or join another start up, but either way your unlikely to face the real risk of putting everything on the line and loosing.