Yup. Know Y combinator funded them. Actually, brings up another point. Curious what people think about applying to ycombinator if they have funded a potential competitor of your company in the past??
Applying is okay though.
E.g. Snipshot and Splashup. Both are web-based imaged editors, but the similarity ends there. Snipshot is an easy editor for end users. Splashup is Photoshop.
After all, they expect a good deal of their companies to fail. If they didn't fail because of the idea then doubling up through a similar company is a good way to increase their odds. They might not fund competitors in the same cycle though.