I was employee #1. It sold to google. All employee options were wiped out.
I got $130k, and their options were worthless.
Luckily the acquirer offered retention bonuses that helped dull the pain, but of course those are taxed at regular income and not long term capital gains.
Oh, and like a previous comment mentioned: the VCs have preferred stock so they get their investment back 100% before any common stock sees a penny. If employees had the same stock as VCs, I estimate I would have walked away with about $400k.
What usually happens is, say the company has received $x million in funding. Everyone is plugging away working hard, but runway starts to run short and the product isn't getting the traction originally anticipated. At that point it looks obvious the company will go bankrupt relatively soon, so the investors push for a sale to try to recoup some of the their money. Often times there is value in the team and perhaps industry knowledge to the acquiring company, but the tech itself is often worthless, so the sales price is below the $x million capital raised and only holders of preferred shares get anything.
Note that founders rarely own preferred shares. They have common stock just like employees, so they are usually wiped out, too, in cases like this.