I suppose one could break this issue down into one of breadth vs depth. You probably can find someone who can do both designing and engineering, but unless you find one of those mythic geniuses, you're not going to get someone who goes very deep in either one. I suppose this might be preferable to certain businesses that just don't have that many deep, involved problems. Of course, as a business grows more complex, you need some specialization. You just can't beat having someone who knows a problem inside and out.

Regardless, I think most startups who hire this way are trying to have their cake and eat it too. It's probably part of the reason why some startups find recruiting so difficult.