The optionality in startup investing has mainly to do with the "limited liability" in Limited Liability Corporation (other types of corporations and partnerships also have limited liability). That is, if you invest a dollar in a corporation, your losses are capped at a dollar. But, your gains are potentially infinite. Another instrument that has that characteristic--limited downside and infinite upside--is an option. The startup equity isn't actually an option, but it is useful to discuss its "optionality" because it does have some similar characteristics.