There are other reasons to join a startup of course-- more autonomy, you believe in the product, etc... but they come at a cost (lower TC and usually much worse WLB).
The math starts breaking down if your opportunity cost gets high. However out of the people I've known who have worked at startups, a decent chunk of them made much more money than they would have at FAANG (and yes, for some of them, lifechanging amounts as just low/mid level engineers). So it makes sense to treat the equity/options as $0 for financial planning/budgeting purposes for sure, but from an expected value standpoint, I don't think it does.
In the beginning of your career, a startup that has solid senior eng talent means you get a good mentor and a big playground where you can really "get your feet wet" and learn a lot, fast. Frankly, in a way that I think is really difficult to do at most FAANGs nowadays where a large number of things are abstracted away.
L5 (and equivalents) are terminal levels at most FAANGs and most engineers don't make staff or above. I think it's pretty common for engineers that get the vibe their current team isn't going to let them reach L6+ to bounce to a startup. This is where typical startup offers (even for "staff" level eng) aren't going to include enough equity for it to be worthwhile. Here, the "non-monetary" factors really need to be huge for it to really make sense as a career move.
So I'm really not convinced as your "run of the mill" L5 engineer that going to a startup is ever going to monetarily be the rational choice. You really have to value something else.
Again, the math here is totally different when you're talking L6+ (or effectively performing/hireable at that level)
But where it really bites you is, as you mentioned, the opportunity cost. If you're getting 0.3%, you're a fairly early employee. A profitable (for you) acquisition or IPO is 5-10 years away, and that $165k salary is not going to dramatically increase in the meantime. In opportunity cost, you (and I'm being very general here) end up paying $2-5m for the chance of that equity being worth something (consider that your compensation will grow as you become more senior at the Big Tech Company, and that you can invest that money). If you are lucky and have good health, you can make that bet perhaps 4 or 5 times in your life, plus some false starts that fail or become obvious zombies within 3-5 years.
To come out on top, you need one of those companies to really knock it out of the park. 1 in 5 startups do not knock it out of the park. And when they do, it's mostly unrelated to the work you're doing - it has a lot more to do with strategy, market conditions, and luck.
I like the suggestion someone else referenced. You can angel invest your FAANG cash and get a pretty similar risk/reward to being an early engineer, but without leaving all that money on the table and without the added hours and stress of being an early startup engineer.
(Also you save several years of getting the company to that stage, which means you'll get many more rolls of the dice for the same number of years)
By that point, you can go several ways. You may see an exit on the horizon and decide to stick it out. The startup could recognize the market for your skills and give you a salary that's in the ballpark of FAANG, or they can provide other compensating benefits more tailored to your personal desires. You could have experience and network connections to create your own startup. Or you could "exit yourself" to a high-level FAANG role for a huge pay raise, while still holding onto that early startup equity.
Again, I'm talking about joining a startup at early stages here, like first half dozen engineers, first couple dozen employees overall. Of course, there's a lot more risk in that approach, but there are also unique benefits. You'll have a huge hand in helping to shape the culture to be the sort of place you like to work.
That's the real selling point of startups; they'll never compete with FAANGs on a monetary basis, even in rather successful exits. A "generous" 0.5% equity slice of even $1B is $5MM, and it will likely take at least 10 years to get there. Add that to maybe another $2MM in salary and bonuses earned over that time, and you're looking at $7MM in total compensation for 10 years at a successful startup.
If you start at about $250K in total comp at FAANG and progress roughly linearly to $800K by year 10, you're looking at $5.25MM in total comp, without having to bet on a startup having a $1B exit. But then again, it's not guaranteed that you'll climb to those lofty $800K positions at FAANG.