First, let me hit this:

It is because when you share too much of this information with staff you develop an “options culture” the I find unhealthy. If you find employees building spreadsheets and spending time on exit scenarios and what their take would be then you know your company has “optionitis.”

Well, that's largely because employee equity offerings are pathetic. People who make these calculations do one of two things:

(1) realize that even at-valuation-- and it's an open question whether their personal valuation should be equal to that, or several times lower, than the VC's-- they are getting shafted. Most often, the startup equity grant for an engineer is an insult. I think there's an uncanny valley effect: low equity, from a startup, pisses me off more than zero.

(2) realize that they'll need to become executives to get real slices, and start playing the same political games for which startups are "supposed" to be an antidote. Often, the founders will stoke this competitive culture but shaft everyone; even the winner gets a pathetic prize-- maybe twice that shitty equity slice but in a high-burnout-risk role.

Join our company because we’re doing exciting things.

Join because you’re going to get more responsibility at a young age than you would a bigger company. Join because we’re a meritocracy and promote success not tenure.

Join because every year at the end of the year you can say that your resume is significantly better than it was the year before. Join because as we continue our successes we will have more resources to reward you with and reward we will.

Most startups are not doing exciting things, are not meritocracies, and while they may inflate titles, don't have the leeway or slack in the schedule for anyone to do anything interesting, so there's actually a lot more grunt work than in a typical BigCo job. Also, most of them don't do shit for a person's resume; the exceptions are also the few where the options end up worth more than toilet paper. If the startup ends up being good for your resume, that's because you rolled a natural 18/00 and have no need of a resume from here on out.

Now, onto the meat of the matter... I tend to agree with Mark that full transparency will terrify and upset the employees. VC-funded startups are disgustingly secretive about things that matter (e.g. cap table) but there are a lot of things that companies, as abstractions, provide a service by hiding.

To get to why most people can't handle the miseries (esp. fundraising) that startup CEOs have to deal with, read into the Gervais Principle. Venkatesh Rao's series on it starts here: http://www.ribbonfarm.com/2009/10/07/the-gervais-principle-o... . Mine starts here: http://michaelochurch.wordpress.com/2013/02/19/gervais-princ...

Here's a summary (of a much bigger topic): the MacLeod pyramid of an organization has a Sociopath tier at the top, a Clueless middle, and a Loser base. Losers are subordinate and strategic (they know what's worth working on) but not dedicated; they know they're getting a raw deal in a zero-sum game but accept it for the risk reduction and easy life. Clueless (typically, destined for middle management but unable to rise above it) are subordinate and dedicated but not strategic; they have no insight into what is worth working on. Sociopaths tend to be dedicated and strategic, but not subordinate.

The Sociopath-Loser trade is a risk transfer. Losers get easy jobs that are hard to lose, and steady paychecks worth less than their average value to the company. (Loser is non-pejorative; it doesn't mean you're bad at what you do or socially unsuccessful. It just refers to the losing bargain of lifelong non-owning employment.) Sociopaths are the risk-seekers who tend to be founders. Most people, if they could handle all the risks of entrepreneurship, would want to be founders themselves.

One way in which VC-istan goes rotten is that it attempts to prevent the healthy and inevitable slide of the put-upon, unappreciated Clueless into (rationally disengaged, more healthful) Loser patterns. "Lean startup" is code for "no Losers"; everyone must work 70 hours per week. VC-istan startups are all-Clueless enterprises; the Sociopaths are the real executives, the VCs and king-making press factors.

However, Mark is fundamentally right on the insight that full transparency would fly in the face of the Loser/Sociopath risk transfer on which companies are typically founded.