For some reason, the financiers were able to convince the gullible tech founders that giving up 50% or more of the IPO to the financier's best buddies was a good thing. And in their greed, the founders gladly went along, screwing themselves and their employees in the process.
(Theoretically, the underwriters are granted a pop because of the risk they theoretically undertake. But by the time the IPO occurs, the underwriter has already lined up sufficient buyers and there is no longer much if any risk, certainly not a level of risk justifying most of the gains of the IPO).
VCs + founders would have been diluted a bit by that (~8% I think?) but they typically[0] still own all of the shares that they did previously.
[0] In some situations founders + VCs + early-employees can sell as part of the IPO itself. I do not know if that applied here.
Maybe someone with a better understanding can say something here but it seems like the way we do IPOs is not great. I'm not sure how to do it better, but I'm sure that there is a better way to do it. I guess this should be the next yCombinator startup. Disrupting the IPO landscape :P.
In the old days, there would have been recriminations. These days, people just shrug and think it's acceptable that the financiers lock up most of the gains for economic value created (or, depending on your thoughts of Airbnb's business model, acquired) by others.
It's one of the reasons Wall Street has fought so hard to prevent become fiduciaries again. If they were fiduciaries they couldn't get away with crap like this.