My point is that few startups actually need the best and they have no reason to pay twice as much for the best in competition with FAANG. And as you point out, the few that do want the best can get the ones that didn't choose or get chosen by FAANG.
^^this. at my startup i focused on hiring smart but very junior/inexperienced programmers. our needs weren't that complicated, i could optimize our stack for their skill, they were happy to be entering in the exciting field of programming, i was open about "i hope you outgrow this job in 2-3 years and i will help you prep for the next step up even if it's not with us", and we got a ton of value out of them.
I think the goal of startups hiring overqualified people is to prevent those awkward growing pains as you transition from a small startup to a company that has recurring customers. That's right in the middle of their growth phase, so they want to avoid the instability associated with paying down tech debt then.
Whether that's enough to justify paying such high salaries at an early phase, I don't know. If you aren't planning on some kind of hyper growth phase, it's probably not. Even if you are, you might do alright without. Reddit survived its stability issues (although I do think they pay fairly well, though not FAANG).
