Seems like it would dilute the pool of companies and create enmity between founders. As far as I know, funding levels already vary between accepted startups, but the whole point of investing is the hope of return -- if YC invested nothing, what would they even get out of a "home run"?
In my case I have money from a previous successful startup, will be moving to the US, and put a premium on local knowledge and the right introductions - for me and others in the same position there is little value in taking small amounts of cash, but the value of everything else YC offers could be quite significant. Surrendering a percentage of your company for a higher value return is quite reasonable.
What's implied in the question is that the YC would still get some percentage of the company. I'm assuming that people aren't applying to the YC just get money to live for a few months. If this assumption is the case, then, theoretically, people would come, give up some part of their company, take no money, and be perfectly happy.
Many YC companies didn't need the money. We (Virtualmin) didn't (though it helped to offset the cost of my move from Austin where I had property to deal with and a car to sell--and the significant disparity in cost of living between there and here...I certainly didn't have any desire to turn down the money, but we signed on for the experience not the cash). pg has said about a third of companies don't need the money. The limiting factor is time for pg, tlb, and Jessica, not whether you need a measly 15 grand to survive long enough to launch.
But, frankly, nobody applies because of the money. There are cheaper sources of money.
