While it sure is generous and I'm sure the founders appreciate it, a couple of months worth of rent and ramen noodle money isn't really funding a company. What you describe is already what YC is- it's just making sure that you are available full-time to really do something about the advice and contacts. :)
Yeah, given the amount YC gives it's as if they just want to make sure poorer founders won't have to get day jobs in the time they've alloted to impart advice.
That's exactly how we look at it: the most important thing we offer is advice and connections, and the money is just to pay your living expenses so that you can focus entirely on the startup for long enough to get it properly launched.
It always annoys us when people say YC is a ripoff because we want an avg of 6% of a co for $15-20k. One reason we don't argue (much) with people who say that is that we treat the question as a sort of preliminary IQ test in the application process.
hoarding your equity like it's gold dust is a typical mistake of inexperienced founders. we did exactly the same and it got us nowhere. when we realised our equity was worthless unless it was held by the right people, with the right connections, things moved far more smoothly.
