In a startup with investors you have money coming from the investors and equity going to them, expenses leaving the company, and money going to and work coming from employees. For a co-op you draw that diagram but have the equity and money arrows that were connected to the investors connect to the employees, with some of the money cancelling out (working for equity, not for free.)

As for why the employees would work for equity, well, they'd value it for the same reasons the investors would. If 1M shares is worth $20M to a group of investors it should be worth the same to 100 employees. You're obviously going to be using personal runway, which millionaires have more of than average workers, but SWEs have been making enough money over the last 30 years that it will be easier for them than almost any other profession.