True that stock _options_ are only worth something after an IPO, but vested and exercised stock options that get turned into equity is a different story.
Equity can be worth something via acquisition from private equity doing roll-ups, corporate buyers looking to fill strategic product niches, etc
Also, for the more heavily vc-funded late stage still pre-ipo plays, secondary market, which can be at a discount to the most recent vc round, or in some rare instances in a hot sector, premium.
One other thing - waiting for the IPO might be the worst thing to wait to do. The public markets are much more fickle than private markets. Once a company IPOs, there's usually a trading moratorium on insider shares, usually 180 days, so by then, the equity value may have completely imploded.
My point still stands even if it's equity. PE/corp buyers may not care about buying out the very small minority stock holders, that is the point I 'm making.
Lets say you've got
Founder A 25% - Voting, Founder B 25% - Voting, Investor A 10% - Voting, Investor B 15% - Voting, Investor C 8% - Voting.
Former Employee A 0.5% - Non Voting, Former Employee B 0.4% - Non Voting, Employee C+ 0.2-0.3% each all Non Voting.
If say Big Co want's to buy the company why do they care about buying out former Employee B? If they can pickup the two founders and the three investors, thats enough for complete practical control.
That hasn't been my experience. I've never had the experience of BigCo only acquiring just enough for 50.1% ownership. There's also clauses in the equity plans for participation on change of control (assuming that BigCo taking 50.1% constitutes change of control)
it's a particular issue with PE, who aren't really doing it for strategic reasons, but really are just there to make money.