Definitely agree that equity compensation carries risk.

However, I've seen equity pitched as a way to "make up" for the lower cash comp a startup might offer.

This is probably the wrong way to look at equity. The expected value of the equity might make up for lower cash comp, but that's with a large sample size. Employees don't get that benefit at all.

It's definitely up to the employee to understand the risks, but frequently they don't, and employers don't actively educate their employees.