This is a pretty rosy "worst case" scenario. madhouse was acquired; most people would consider that a success. The vast majority of failed startup founders do not get a VP position at their next job.

I suspect that for the vast majority of failed startups, the cost is mostly pride and the lost wages of having a steady job for that 2-3 years. The benefit is whatever experience you gain from that time period - people will judge you based on your skill level and what you've learned.

There's also a much-worse case where people take on $100ks of debt, lose their friends, lose their home, get divorced, and waste 10 years of their life on a venture that was doomed from the start. This outcome is fairly easily avoided by keeping perspective and constantly re-evaluating whether the potential upside merits the risks you're taking, but it does happen to some people.