My former employees from IndexTank would differ. Our acquisition was life-changing to them. They didn't value equity at all when they joined, yet it worked out really well.
You can think of employee equity as insurance against "I joined Facebook early and all I got was this lousy t-shirt."
That is really good for you and your employees (no sarcasm intended at all; it really is a good thing). However, this case is an outlier. The percentage of startups that straight up fail or at least don't get sold is huge. The percentage of startups that succeed and make it to a sale/IPO but don't get a high valuation at this point is huge. The percentage of startups that get sold/go public but don't pay out or don't pay out enough to their common stock holders is huge. It's true that every lottery winner thinks that the $2 lottery ticket they bought was a great investment. That doesn't mean that investing significant amounts of money/time in lottery tickets is sound investment advice.
I think people who equate startup equity with lottery tickets don't really belong in startups to begin with. The whole point of working at a startup is that you go there and you make it succeed. Now of course there is still luck involved, and you shouldn't be so naive as to blindly take every founder's change-the-world pitch at face value, but whether you are a founder or early employee you have to believe that you can make it work.
There is a huge difference between making a startup succeed and a sale that pays out to you. A startup can get sold for lots of money but if during that sale your stock is not set up to be paid out, you lose. As an employee you can make a difference for whether the sale happens or not. You have very little control over how it happens.
Seems like you're moving the goal posts. I acknowledged luck in the equation, but how the sale happens has a lot to do with the founders, that is the people you decided to fall in with. Again, it's different from a lottery ticket because you can have knowledge about the founders, their track record and there modus operandi. The average first time startup employee might not have a clue, but that doesn't mean it's impossible to gain good insight that you can apply in your decision to join as an employee.
It's not impossible to get life-changing money by being an employee in a start-up. But it does require a bunch of things to all line up, many of them outside of the employee's control, many others the employee hasn't even considered.
You can think of employee equity as insurance against "I joined Facebook early and all I got was this lousy t-shirt."