It's also broken if it simply selects for people who can only code well - with little-to-no insight into how well they collaborate and work with a team.
Perhaps the smaller/scrappier startups are trying to have more rigorous processes because small startups don't have as much resources to train new hires when compared to 'big 4' companies, so they really need engineers that can do it all themselves, quickly and under-pressure. They also may be more risk-averse when it comes to false-positives, because if your entire engineering team is 5-10 people, you're much less likely to be able to afford to get it wrong and hire someone that won't end up working out.