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This is an expenses paid (but no wage) internshipI'm expecting to save $3000 CAD/month this summer as an intern after all expenses (I'm living cheaply, but my wages are quite average). The work I'll be doing is also a great deal more interesting, I suspect, than any web startup could ever offer.
While I would't expect to make as much money if I was working for a startup, this offer is simply a rip off. As reference, personally I would expect to be offered a bare minimum of $12/hour for technical work. That's the level at which I wouldn't laugh in your face and walk off.
If your company is too cheap to pay students working for them, that also raises questions about the sort of work that they would be doing, and now interesting it might be. It also implies strongly that the students would be on a lower rung and would be a "lower class" at the company, with poorer working conditions and a lack of respect.
Overall, unpaid positions without massive perks [edit: or other forms of payment] scream "AVOID!".