YC has the exact opposite of that policy. They'll fund competitive companies. Numerous examples exist.

I would be prepared for the question "What do you understand about this that $COMPANY does not?", but you should expect them to ask that about the industry leader first, rather than about a startup with a market share measured in basis points, which describes the overwhelming majority of startups (YC funded or otherwise).

I would also be prepared to have people, perhaps including the YC folks and perhaps not, tell you "You're not actually in competition with them."