It’s a check for ‘can this person handle losing a large chunk of money when they get swindled by management after investing in a private company’, which will almost certainly be the case if you don’t have more money to kick in every round (dilution) or don’t own preferred shares, or any number of other tricks. Google or Meta recently ‘acquired’ a company by offering them salary packages that matched the equity they had in their company and then skipped buying the company so anyone with shares left got screwed over when the husk was sold for 1% of its prior value, since it was almost worthless once all the talent was acquihired.
