[haky_nash]

From the FAQ:

Will you fund multiple startups working on the same idea?

Yes. If you fund as many companies as we do it's unavoidable you'll end up with some overlap. Even if you tried not to accept competing companies, you'd still get overlap because startups' ideas morph so much. The way we deal with it is that when two startups are working on related stuff, we don't talk to one about what the other's doing.

In practice it has not turned out to be a problem, because most big markets have room for several slightly different solutions, and it's unlikely that two startups would do precisely the same thing.

[aptwebapps]

That's a start but the GP wasn't asking about competing entrants in the same batch but about a theoretical entrant that would compete with an established YC partner.

[haky_nash]

Umm I think that was a more general comment. And the reason that makes up the later part of the answer sounds very general and applies to the GP's question.

[aptwebapps]

"The way we deal with it is that when two startups are working on related stuff, we don't talk to one about what the other's doing."

This seems easier to do with two startups in the same batch than with a new startup and an existing YC partner, although I suppose they could use the same approach.