It's also information asymetry. A classic financial arbitrage move. The founders offering the employees options understand all of the terms and scenarios that people in this thread are discussing, but most potential employees are not aware of these factors. Many potential employees will discuss their offer with trusted "experts" in their personal network who also are not familiar with the multiple scenarios that can devalue these options. Making complex financial deals with another party who is less sophisticated is always great for business. That's why employees should be even more careful when negotiating compensation with startups. If you can't spot the sucker at the table then the sucker is you.
And if the company decides to screw you over, it's really easy. If the pie is so huge that it's worth you getting a lawyer to fight back, generally 1) they aren't so selfish, and 2) they realize you will get that lawyer to fight for your piece.
There's 10 ways for you to get devalued to 0 and you have to avoid all of them to make a payout.
