Well it is a good idea (I guess) if you want to keep taking chances but don't want an IPO or acquisition. You can't expect employees to keep working for risky stock forever.

They'd have (I assume) a good few employees with $1/2m - $1m or even $50 - $100k worth of stock. For many, it's probably more then everything else they own put together. You wouldn't want to put everything you own on one risky & speculative tech stock. They'd be pretty keen on an IPO. I guess letting them cash out a bit is a way of releasing some of that pressure so they can keep taking risk.

It seems like a dangerous route to take, to make some of your key employees rich before there's a proper liquidity event. I can only imagine what it will do to their motivation and to the internal politics of the company.

Of course, very few startups find themselves in this position anyway, being worth billions but with no interest in selling at the moment.

That's one way to look at it, and I am sure some employees might leave after this. The other way to look at it is that it re-energizes the workforce and the early employees, makes them stick around longer, and gives some hope to the other employees that have joined later.