This is what happened. It's important to understand I'm not bitter about it (anymore), so I'm really just listing the exact steps that led to my "fall", as they happened:

1) About a year after me being into the company and having taken substantial lead in all the engineering initiatives (I was working like crazy and hugely motivating the other folks, always at least 12 hours a day, but it didn't feel like it because I was really excited, so nowhere close to burnout), one of the founders (the CEO) talked to me and said I was doing an amazing job, better than the other technical leads. He said when the time would come, he would seriously consider me for a VP role (we didn't have any VP by then and the company was still just experimenting, we had a few paying customers but no clear vision on how to go to market).

2) After a couple years of tenure, the founder/CEO came to me and said that the company was doing really well (we were growing exponentially by then, and taking new funding with very favorable terms) and that it was time to bring in an experienced VP of engineering. The candidates he had in mind (introduced by the VCs) were all in their late 40s with at least a dozen years of experience as executives, so clearly I wasn't the right person for the role since I was in my very early 30s with much less management experience. He described the VP role as someone who would take on a lot of the overhead I had to do myself, like hiring and keeping a tab on the deliverables, but that on a day to day basis I would still fully lead the engineering team. I kind of believed the story so I didn't think too much of it, and didn't think it was the time to raise drama.

3) Shortly after, the VP (one of the candidates from VCs) came in. He spent a month or two observing things, then talked to me and told me how I was doing amazing things and how everyone in the team loved me (he had 1:1s with everybody where I was praised a lot), and how he wanted to concentrate me more on working on experimental projects while he would be looking to make "big changes" by hiring experienced managers. He said my experience was very good as an IC, and that by managing people I would be "wasting my talent" and that it was all part of scaling the company. I told him I still wanted to be involved in the team operations, and initially he said it was ok, but then over time he proceeded to sideline me more and more (e.g. not including me in relevant technical meetings where I could have easily provided good input). Go figure why, I don't believe I was ever hostile to him or anything that would make me appear bitter. It felt like he was thinking "let's see if I can succeed without him, as opposed to using his help to succeed". At times, I was excluded in things where I more than obviously needed to be in (e.g. niche areas that I architected). Occasionally some of my peers would IM me and say "Hey why are you not in this meeting?".

4) From then until now, the VP has installed this new layer of mid and upper management (directors and managers) by hiring people who strictly have at least 10 years of experience as pure managers. Since we are a startup and we can't exactly steal people from FAANG due to our lower offers, he had to settle with those C-class players (in my opinion) coming from big "stagnating" companies. These people have a completely different perspective on the role, duties and responsibilities than our original culture. They have no vision, just process, which causes the problems mentioned in my initial comment. During this period, my impact on the company has been minimal since I have been put on the sidelines as per VP's request and, while I still have fun because I get to spend time on cool stuff, I haven't affected the bottom line, which I think I could have done had I been still involved in the teams.