Yes, of course you have to be careful about giving away too much for too little, but YCombinator offers much more than just cash.
Paul Graham has a ton of experience and a ton of contacts. Having him, his team, his friends, and his firm on your side is a lot more important than the cash. Being able to take knowledge from these people, along with the other companies within YCombinator is a very important piece of the puzzle.
A lot of times, VC isn't about the cash, it's about the contacts and knowledge.