This argument is flawed. Yes startups have payoff akin to out of the money options, but that is obvious. However, the number of other startups would not affect the volatility. If anything it would be analogous to increasing the interest rate, since it increases the opportunity cost or cost of capital of investing in one particular startup vs other ones and decrease the value of the call option marginally. What would be analogous to "high vol" would be the speed of the startup to iterate and get to a real business model.