Ask HN: Should we apply for YC Fellowship if YC has funded similar company?

We have launched a company but it has not been going as expected and have a few problems with the model.

See online Office hours that was held a while back. Since then we have been doing customer research and have been testing a few ideas. We have hit upon something that we believe has massive potential with a great initial market.

In doing research on the idea i found that YC has already invested in a similar idea. We are not exactly the same, but very similar and could be considered a competitor.

Should we apply to YCF? What is YC policy on this?

Also note we are also geographically located else where so not playing in the same location.