At heart every one knows their limitations and every one tries to hope that they can acquire more than their capability allows them to achieve naturally

Expectation is not the same as desire, every one can have unreasonable desire, but expectation is more subtle. If the guy has been groomed from the earliest school days based on his/her performance that he/she can easily go into Harvard by the community, teachers, parents, friends etc and because of some ill health, he flunks a exam which makes him not achieve it, it may even destroy his whole life, because he may feel he has disappointed his teachers, parents etc.

The startup world creates enormous expectations using desire as the fuel. Imagine the number of people thinking just getting selected by YC leads to success of their idea or the number of people who get funding assume they have already succeeded. These are starting points and mid points in their pursuit to success. These creates unreasonable expectations which increases the pain. Where as if you pursued these are part of your desire the pain will be less.

Expectation is assuming you have got it and latter found you have not really not got it, where as desire is aspiring for higher things perfectly knowing you may not get it.

Creating Unreasonable Expectations causes more pain than creating Unreasonable desires. It is the difference between applying for a lottery and finding the lottery ticket is a forgery.

Next year, he needs to start all over again. It is at this point, where he sees his friends already start college and slowly feels excluded from the 'college social circle'. We, of course know it's all in the head. But does he?

While I totally agree with your "failing as a startup founder hurts, but it's not the end of the world" stance, comparing this to not getting into university is not correct. Someone's life changes for worse dramatically and almost irreversibly when this happens. After a failed startup you just move on.