"What is stopping the founders from “just finding another job”?"

Do you really not understand the concept of equity?

"suggests that the founders will actually lose money if the business fails, where in most cases the business goes bankrupt and the founders only lose whatever seed capital"

Oh, they only lose their "seed capital" (plus all the --usually unpaid -- work they've put into starting and growing the business).

That makes it okay, then!

"The employees also lose eveything they put into it"

The employees got paid every week, dude.

The founders were just gambling with 'their "seed capital" (plus all the --usually unpaid -- work they've put into starting and growing the business)' - they knew as well as you and I what percentage of businesses fail, and what percentage exit at tiny returns.

It's a tempting gamble - hoping for a 100x or 1000x payoff on that bet, especially since most people who take that bet believe they can "make the difference" - but if they're unhappy with the prospect of "losing it all", they perhaps should "just find another job".

"hey knew as well as you and I what percentage of businesses fail, and what percentage exit at tiny returns."

Yes, they did. And they chose to forgo a regular paycheck.

Why don't the employees take advantage of this "tempting gamble", then? According to you, there's really no downside at all, right?

Some of them do. At least some of the gambling type.

I have twice, neither time particularly successfully - in fact one time quite spectacularly unsuccessfully if measured purely by how much money I put in my bank account for that 18 months of full time work. And I'm seriously considering an offer to ride that ride again right now...

The downside is the consequences of failure usually include losing money - either real invested money, or in opportunity cost of the gap between market-rate-salary and what you're able to pay yourself for the time you spend working on your own business. This is often not a problem for early twenties tech dudes, it's not a realistic gamble for someone with a family or other responsibilities for which foregoing a reliable regular income isn't really a sensible/ethical option.

The main downside is social. Many founders are ruining their personal lives.

(Also in consequence ruining lives of others.)

The gamble is not free at all.

Can you clarify whether you're talking about Silicon Valley companies? Because here, founders don't usually put in any money themselves. Yes, they go unpaid while raising.