Most employees expect an IPO exit if a business is successful. I suspect that "if we hit it, we will share profit with you" would be a lot less attractive for an employee.
Most of the world runs on engineering done by folks not expecting an IPO payday (and instead, base, bonus, work life balance, etc). >90% of startups fail and never have a payday [1]. Employees will find opportunities elsewhere and expectations will need to more closely align with reality for those holding out for the "before times" that are unlikely to exist again [2].
Of course, but a small portion of the employees, disproportionately concentrated at startups, are willing to take a bet on an eventual exit. They accept a 90+% chance of a company going belly up and a 7-digit payday if it becomes a roaring success.
But without an IPO it becomes a chance for a small royalty payment, and this is a lot less attractive success.
I agree, these folks will have to make do without these previous opportunities existing or exit the industry if that is not palatable. Lottery tickets drying up.
But what is the reason for no longer selling those lottery tickets? Some employees really want them and they are a very good deal for the employers -- cash strapped early startups. What drives the drying up?
Interest rates rising providing a risk free rate substantially higher than the last decade, making it less necessary for investors reaching for yield to get VC asset class exposure. No VC funding, no startups issuing lottery equity tickets.
The situation will improve as the Fed cuts rates, but zero interest rate policy that fueled the previous economic exuberance is unlikely to return due to structural economic changes.
[1] https://danluu.com/startup-tradeoffs/ | https://news.ycombinator.com/item?id=40363262
[2] https://news.ycombinator.com/item?id=11112367