Optically this looks very bad, and I don't think there's any way around that. I would argue, however, that other companies choosing to replicate Cypress's service with Cypress's (open source) project is in bad taste. When I first read about the issue, I was pretty annoyed with Cypress, but after reading about the other companies profiting off of the project, I felt they were probably justified.
Obviously given the MIT licensing, people can do whatever they want with the project, including start a business, and I'm perfectly fine with that. But I also think it's within the company's rights to discourage such behavior, particularly when the businesses are just trying to undercut Cypress's only funding model. People who are particularly aggrieved can fork it, and go on with no hard feelings, but stewardship of a OSS project comes with a significant ability to guide its direction, and saying "don't kill us" doesn't seem unreasonable.
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On the other hand, Cypress's funding model is completely stagnant (from what little I know) and they have been unsuccessful at differentiating their paid offerings, other than by coercion (you must pay us for distributed CI, etc). In that way it would be sensible for other companies to provide new functionality/features, but not while drawing on the company's resources/goodwill, _and_ when some of them don't actually differentiate, they just replicate.
_I_ would almost never make this decision with my own product, but then again, I've never accepted VC funding or had many employees to look after.