Of course, much of Silicon Valley is a living testament to the fact that options can have incredible value for the right cases. Every startup has a rhythm to it and, if you are holding .5% of a "hot" startup in the form of options having a low exercise price, it normally is worth the gamble of biding your time, taking reduced pay, and seeing if the big payday will come. Many founders think in these terms and, if their startup fails to galvanize and moves instead in only fits and starts, will seek to cut their losses and move on. In this sense, the perceived value of the options as seen at the entry point does not turn on what average returns may be for such options considered generically among the entire universe of startups. It turns on more subjective factors such as whether the startup is doing something exciting, whether its key people make up a strong team, whether it has attracted quality backing, and the like. If those factors are there, then founders do not really view it as a matter of average returns across a broad class of startup types but rather view it as a matter of the likelihood of a big outcome for the particular startup being considered.
That said, options can prove illusory in many cases and caution is definitely in order. It normally does not pay to hang in with an uneven venture in the vague hope that it can somehow turn things around and yield a great equity return for your small piece of the company. Among other things, if a venture goes through multiple rounds of funding, the liquidation preferences get to be so great that option holders may easily get a very reduced payout, or even no payout whatever, on acquisition. Also, if you hang around while all your options vest and then leave the company, you typically have only 90 days within which to exercise them or you lose them altogether. That means a cash payout that only increases your risk or, even worse than that, a large tax hit with no cash return if the stock price is high following a series of fundings. Of course, there are (as the author notes) many good reasons to be in a startup apart from equity payout and it may still be worthwhile to stick it out in a doubtful venture for a time owing to those other reasons. But don't stick with a dubious venture based primarily on the hoped-for equity payout in such cases because, in that case, the odds definitely are against you.