Conversely, if the startup starts taking off, the startup might look for an excuse to fire you to weasel out of paying your unvested options. That happened at Zygna and Facebook.
So, there are several bad things that can happen with options/equity.
1. The company fails, the options are worthless
2. The company is moderately successful, but not spectacularly successful. If your unvested options are worth (say) $30k/year, then they have no reason to give you a $30k raise if market rates increased by $30k (either due to a better job market, or your increased experience).
3. The company is spectacularly successful, your unvested options are worth big $$$. Now, your employer has an incentive to cheat you. They can look for an excuse to fire you (not too hard with at-will employment). They can raise another round of financing with a liquidation preference, reducing the value of your common shares. They can block you from selling your shares (Uber did this recently). The executives can give themselves big options grants, further diluting your common shares (happened to Eduardo Saverin at Facebook).
So, there are several bad things that can happen with options/equity.
1. The company fails, the options are worthless
2. The company is moderately successful, but not spectacularly successful. If your unvested options are worth (say) $30k/year, then they have no reason to give you a $30k raise if market rates increased by $30k (either due to a better job market, or your increased experience).
3. The company is spectacularly successful, your unvested options are worth big $$$. Now, your employer has an incentive to cheat you. They can look for an excuse to fire you (not too hard with at-will employment). They can raise another round of financing with a liquidation preference, reducing the value of your common shares. They can block you from selling your shares (Uber did this recently). The executives can give themselves big options grants, further diluting your common shares (happened to Eduardo Saverin at Facebook).