How is this different from any other company though? It happens a lot where I live. You either know the higher ups through some sort of connection(school, event, family, etc) became friends and that's it you landed on a nice position.

I'd love to say it's only prone in startups but it's been plaguing companies forever, especially small-medium sized ones where it's easier because the owner is probably hoping to find able hands, perhaps the huge ones have slightly better processes to counter this type of scenario.