Investors in the unicorn know it's a ridiculous market cap, but will lock in preferential payout on the exit. This means that while the employee private equity may increase in value, the employees get pennies on the dollar during the exit because the majority of the payout goes to the investors who inflated the price to begin with.
It gets worse when employees pay taxes on the equity at the inflated valuation, but there are ways claw that back later.
But you don't have the counterfactual to know what the company would have exited for without the ridiculous valuation. Probably a lower number.
The difference is the expected value of income that the employees are given in equity, which is especially nefarious.
This is not a thing that happens in the vast majority of circumstances. Preferences are for downside protection not a way for investors to actually make money. No one invests with the goal of making use of them.
Investors who play in this arena are not stupid: https://angel.co/blog/liquidation-preference-your-equity-cou...
Per your link, they sold for $425 million.
The investors lost money.
That is not the outcome they were hoping for. However, their preferences did provide them downside protection which was, as I noted, their purpose.
1) Good Technology was valued at $1.1 Billion.
2) The investors lost money, but the employees lost much more.
-> This is the problem with unicorns.
You've completely missed the point.