Let’s try to rearrange this to demonstrate that your reasoning that employees are not investors is wrong:
Instead of paying employees below market rate, the startup pays employees an actual fair market rate. Note that because of the short term failure risk of a startup a fair market rate is /still/ higher than market rate and an established company. Now each time they receive a paycheck the employees give you back a chunk of the money in exchange for common shares. The end result is the employees have the same amount of cash and shares, and the company has the same amount of cash.
Employees working below market rate are investing in the company. Getting paid isn’t “security” it is the part of their income the employee is choosing not to invest in the company.
Yes, the 'employees are investing their time' point is an established argument, this rhetoric is well-trodden.
But they're still not investors.
Putting in a considerable amount of hard cash, is a fundamentally different thing than considering the after-tax value of some possible future gain from employment ... and then putting in hard cash. (Though it's definitely a valuable calculation to make on the part of the employee.)
If someone walks around the Valley talking about how they are 'investors' in X, Y or Z because they worked there for some time as an employee, but did not invest in a round, they will definitely be misinterpreted because the premise is simply not generally accepted. Moreover, this person would either be marked as 'not understanding what he is saying' or 'purposely misleading people'.
Consider the vastly different terms attached to the equity of either side ... and that so many actual startup employees who have done modestly well on some exit and then do 'part time' Angel investing, generally participate along the lines of classical 'investors terms' , not on the terms of the employees of the startups they fund. There's a reason that this is the common standard, and that there is no movement afoot to put investors and staffers on the same terms.
Instead of paying employees below market rate, the startup pays employees an actual fair market rate. Note that because of the short term failure risk of a startup a fair market rate is /still/ higher than market rate and an established company. Now each time they receive a paycheck the employees give you back a chunk of the money in exchange for common shares. The end result is the employees have the same amount of cash and shares, and the company has the same amount of cash.
Employees working below market rate are investing in the company. Getting paid isn’t “security” it is the part of their income the employee is choosing not to invest in the company.