Ask PG: Would YC fund applicants in close space as a previous startup?

How does Y Combinator consider startup applications where the idea is in the same space (yet with key differences obviously) to an already funded company? Is this just an absolute "no" or is it considered independently? I can see 2 situations: One where the applicant aims to develop (or has developed) a product that is a magnitude better than the previous startup, and the other where the applicant isn't a direct competitor, but may be confused as one by those not knowledgable in the industry.