Honestly, I think most startups are betting that employees don’t know any better. This was true up to maybe 5 years ago, but sites like levels.fyi have really made this trade off clear to potential employees. Half the time when I talk to a potential hiring manager at a private company, they really don’t know what the equity is worth or how it’s structured.

I’d argue that an effective 20-30% discount on 409A for employees in series C+ is about right. On a successful, but expected, exit - this gives the employee some premium compared to working at a public tech company in exchange for deferred compensation and liquidity risk.