This is a plan that is much worse for employees, being presented as if it were better. At least be honest about feeling like you are paying employees too much equity up front and want to pay them less.
Basically this lets the employer retain more of the upside in stock appreciation - your equity bonus is now recomputed every year at the current stock price, and presumably expressed in dollars (not shares). So they'll say "oh you're getting 50k this year in stock", when you got 40k last year, but meanwhile the share price has doubled and your 40k in equity _would_ be worth 80k if they had given you all 4 years up front.
They say it protects against downside, but odds are if the company isn't doing well they'll cut the dollar value of annual bonuses as well.
Not also pay them less. It turns out that for the average person sometimes this four year grants when fully vested are enough to retire or to switch to a job that pays less but has better WLB.
They are paying people less because they want to keep them in the "golden handcuffs" for longer. The way it's painted by this particular VC is particularly gross.
Also executives usually keep the upside potential. So as an engineer if because of your work the company skyrockets and becomes 8x more valuable over the year you share 0% of that upside, while executives cash in. On the downside, as an engineer you can just leave because the market is very fluid, truth is you don't need job security from your employer if you are a good software engineer. If/when that changes probably compensation will go down enough so that this mega-grants are not going to be a problem anymore. They are just counting pennies.
To me this all depends on how it's implemented but you're right to be suspicious.
If all they do is give you 1/4 of the equity they were going to give you previously, then yes it drastically reduces employee upside to the benefit of others (execs, investors).
But they probably can't do that because it would be harder for them to attract talent against a 4 year vest company. Instead they'll probably have to bump up that initial grant so that when employees do the math there is still the big upside if the company improves.
I'm suspicious of this as well, but would this be better for a lot of employees? Go to Coinbase, get your 25% stock in 25% of the time, then "just" go somewhere else and get more. It's not unheard to return to a company later (Coinbase in this case) and get a better title, additional grant, etc.
They say it protects against downside, but odds are if the company isn't doing well they'll cut the dollar value of annual bonuses as well.