If I need to launch a complex product in 6 months or die, I don't care whether my senior developer had his entire family die from serial dysentery. You're either working as hard as you can getting us to the milestone, or you're not a developer here.
The truth is that being "loyal" will kill a startup.
Actually, I know what kind of psychopath: the kind who ran the only startup I ever joined. He once told me, "I am at war, and if one of my men can't keep up, I will shoot him." A remarkably similar sentiment to yours! He also used to phone people up and yell at them if they didn't stay till midnight or come in on weekends.
Needless to say (or so I would have hoped), this is an algorithm to produce not a "complex product" but a fiasco, and that is exactly what happened. I was long gone before then, though. What kind of leader shoots his own men? What kind of people want to work for a leader who shoots his own men, or doesn't care if their families die? I know what kind: scared, servile placators. And since such a team hardly makes for startup success, there really isn't an argument here, only a form of hypnosis.
I also am, however, very pro truth.
Anyone who tells you he can have employees with low or zero productivity, for whatever reason, as select members of a small, highly leveraged startup - is either lying to you, or will fail unless he's extremely lucky not to have such employees.
If your team consists of 3 senior developers, and one of them stops producing, your project will likely be pushed back a third or more over schedule. This can easily kill a startup, since if your idea has any merit at all (which is your only chance of success anyway), then you have ten other teams competing against you to launch first.
I totally agree that employees should be respected and cared for, and that a key employee leaving a startup is generally the startup's fault. However, if someone doesn't work out, he will be let go. Not just by the employer - his co-workers will call for his head, since his problems (whether he's to blame for them, or not) endanger the entire team.
If I need to launch a complex product in 6 months or die, I don't care whether my senior developer had his entire family die from serial dysentery.
Yeah, yeah - really respectful and caring.
"Respect and care" means among other things, that you keep your business running so it can respect and care for the majority of employees. If you're going to take things to extreme, why then I need to "respect" every candidate by hiring, and "care" for any employee who just feels like taking a 20-month meditation trip to Tibet, since the woes of this modern world are depressing him.
The fact remains the same: a lean, highly leveraged startup can't allow developers to go off on vacations for 3-6+ months, no matter how badly they need it. Hell, if you're that kind of startup, those 3-6 months may very well be your entire product (or life!) cycle.
Also, taking that sort of hard-nosed attitude will make the other developers on your team more wary, which will result in higher salaries, more turnover and (if you're a real idiot) no new staff, since word gets around. Ultimately you depend on your staff, so if you play hardball you're likely to reap the 'benefits' further down the track when you need them.
* - this was your original point, not some "meditation trip to Tibet"
And yes, anyone expecting any kind of job security at a startup, especially a VC backed one, is simply fooling himself.
If you're developing an innovative product for the iPhone market, you can be sure that it won't be "innovative" in a year, especially if it was a good idea to begin with. Not to mention that in a year, such a fast market will move so far, that your original business model will be outdated in significant ways, because your price point, features, and target audience analysis are now all obsolete.
Even without that, though - you realize that VC-backed startups are a huge chunk of the startup sphere? In fact, the author of this article is a VC, and probably most of this article was written with VC-backed startups in mind.