A YC rejection is not a large defeat.
I'd say that most successful people (start-ups are shorter-lived and may skip this) have experienced many situations where they thought they had it all, everything was going their way, they were at the peak of their game, and suddenly everything came crashing down disastrously and unexpectedly.
What made these people successful isn't the defeat, but it's that they then picked themselves up and started again from the bottom.
What's kept me from applying to ycom is having a technical co-founder that I believe in. But that hasn't kept me from launching and running a relatively successful (in 4 months) mobile startup.
I love reading HN and following the ycom companies, the quality discussions definitely impact my thought process and decisions in the company.