I call bullshit. For financial risk, this doesn't apply if the founder doesn't have much to lose, or has a stable family they can rely on, or is just starting their career, or doesn't care about money. For reputation risk, that's hardly an issue, because making mistakes in considered a legitimate (even honorable) form of learning in startup culture; it certainly does not ruin someone's reputation.
The real answer is way more simple: the founders hold most of the cards, and the engineers don't.
Edit: and if the engineers don't like this, they are free to try to start their own startups.
This is head-explodey. If the engineers don't like the deal they're getting, they can go work for other companies. If they should be getting a better deal, they will. There simply isn't a glut of dev talent right now. There is the opposite of that.
exactly. and founder vs employee isn't a species difference. it's a role difference, and only at a moment in time, and only with respect to one particular company. any employee could also (before|instead|after) be a founder for another business. Don't like the perks/negs of being a mere employee? Fine, be a founder. And vice versa.
The real answer is way more simple: the founders hold most of the cards, and the engineers don't.
Edit: and if the engineers don't like this, they are free to try to start their own startups.