A lot of the startups that I see that try this are doing it because they really believe that they're bringing the value in this relationship - that they're going to be so successful, there's so much money here, they have SUCH a good concept, that the applicant should be grateful to get in on the ground floor.

Of course, 90%+ of the time they're totally wrong about everything about what they're bringing to the table, and in the other times, they'll often conveniently change things around to benefit them, like, "Well, you know, I know we said 4% of the company once we raised series A, but honestly, your contributions have not been what we expected, and so you really only are entitled to 1%"

To quote "The Spanish Prisoner":

Jimmy Dell: I think you'll find that if what you've done for them is as valuable as you say it is, if they are indebted to you morally but not legally, my experience is they will give you nothing, and they will begin to act cruelly toward you.

Joe Ross: Why?

Jimmy Dell: To suppress their guilt.

I got an offer last year from a company who offered me a 25% salary cut from my current salary and some negligible equity percentage, and then got all huffy when I tried to negotiate the salary. In their mind, the equity was worth so much money, they could pay me peanuts and I should still take the job. It was a huge turn-off. The guy basically told me to go off. "Why bother with startups, then?" he says. Completely missed the point of equity/salary.

Also, if the equity is worth so much money, why are they even offering it to you in the first place? You'd think they'd want to keep it all for themselves.

I had a conversation one time that went sorta like this (I don't remember the exact numbers):

Me: I'd rather be paid, say, $250k to do the work in a year and zero equity

Guy: But if the equity will be worth, say, $4 million in a year, why wouldn't you do the work for $25k?

Me: If the equity will be worth $4 million, why are you arguing over it - wouldn't it be better for you to pay me the $250k and pocket the remaining $3.75 million?

Guy: But the $4 million isn't guaranteed! That mightn't happen.

Me: My fucking point exactly!

And even after saying that himself, he STILL couldn't understand why I would turn down the equity...

I'm going to have to watch that movie. I've actually seen that happen and could never figure out why.

I think you underestimate the number of programmers who are willing to work under such conditions for the "glory" they perceive the position to bring (and, of course, there is no shortage of people who actually think their lottery ticket is worth far more than it really is).

In an area where there is a high concentration of people who are young (naive) and (relatively) debt/responsibility free it's easy, almost trivial, for a founder to exploit them. I perused Angel List some time ago. The salary offerings were hilarious. It's very clear to me (mid-30s guy with a family and mortgage) that they are targeting a certain age and social group.

It's like spam, right? If you respond based on hilarious numbers, you're exactly who they're looking for.

I didn't know about that site so I went and checked it out.

Holy crap. Most of the listings there are completely hilarious. They expect anyone to work in the bay area for those salaries? (and I'm a different demographic than you -- 20s guy, no mortgage, family w/ no kids.)

They try to sell it because they believe it themselves.

This is almost worse than them lying, insofar as incompetence can be more damaging than selfishness: you can negotiate with a selfish person to get something for giving them what they want. You can't get anything out of someone who can't deliver.