You mean lie on the resume / hide their level of responsibility?

That doesn't make any sense whatsoever (beyond being dishonest, it would likely be surfaced in reference checks and stop a hire).

I'd see the startup experience as very positive, assuming they could articulate why the startup failed and learned from the experience. There's many startup CEO's who would make (and are) great sales, strategy, or product leaders, and CTO's who would be great fits for engineers, architects, or engineering managers.