At first, I found the question impolite.
It's not. It's a perfectly normal and reasonable question to ask and it's one you need to be prepared for. Lying is a terrible idea.
Also I find it to be a double standard, since it was a start-up, and most start-up I know have a 1 year employee turnover.
While turnover is usually higher at start-ups, this really isn't normal or typical in my experience1, meaning a short stay at a start-up is still something you have to explain.
But I'm wondering how one answer that question?
It's actually not that difficult, you just need to prepare an answer up front. The goal for your answer should be:
- make it clear that job hopping wasn't your intent
- be factual about the reasons you left a company
- don't disparage former employers (as you've correctly identified as risk here)
A short-form answer to the question is ideal: don't go into details for each job initially but summarise it somewhat like:
I've had unfortunately short stays at my last few employers due to a relocation for family reasons, unhealthy expectations and WLB, financial instability, and a dispute around my inclusion in the C-suite.
If they ask further, then you can provide additional detail on specific jobs. Under no circumstances should you ever mention management as being clueless or a CEO being insane. Ideally you can tie issue with management to specific problems in your day-to-day such as working unreasonable hours, not being able to manage your people effectively, etc. Tie it all back to values in an employer that you are now actively looking for. If the third company went under, mention that instead.
What interviewers will be wondering is whether you just got unlucky or whether the problem is with you. If it's the former, they're looking for you to acknowledge the job hopping history and making it clear that you're looking for a long-term commitment. You don't just do that through words but also by being seen to ask a lot of questions on your end to demonstrate that you're putting a lot of thinking into this job search and are looking for a great match. That will not only come across as more confident and professional, it's also something you have to do for yourself. You should strive to be in your next job for at least two years, ideally more, to correct the pattern you currently have on your resume.
1 User Corsika pointed out this did seem typical to them: the point is still that for most people unfamiliar with start-up culture it won't be typical and pointing it out is likely to be seen as hiding the "real" reason you left. Much safer to point to the specific reasons you left the start-up: WLB, no vision, poor management strategy. Those are things you can turn into "why I want this [more stable] job".
Side note after looking at the time frame you give: if that third job you mentioned was really only a few months long, you should take it off your resume. It's not doing anything for you. More on resumes in this question
I'd also recommend reading my answer here.