A Y Combinator startup named PearAI sparked immediate controversy after launching with a thread on X and a YouTube video on Saturday, bringing some criticism onto Y Combinator itself.

PearAI provides an AI coding editor, and its founder, Duke Pan, has openly stated that it is essentially a clone of another AI editor called Continue, which is licensed under the Apache open-source license. However, PearAI made a significant mistake by initially imposing its own fabricated closed license, dubbed the Pear Enterprise License, which Pan later admitted was generated by ChatGPT.

Modifying a license in this manner is a serious issue in the open-source community. Not only can it lead to legal ramifications for violating software licenses, but it undermines the fundamental purpose of open source, which is to foster community, sharing, and collaboration. In an apology posted on Monday, Pan announced that the project has now been re-released under the same Apache open-source license as the original project.

The launch thread went viral, generating thousands of comments by Sunday. While some were congratulatory, others harshly criticized the licensing issues and highlighted that PearAI was more of a replica than an innovative fork, a point Pan acknowledged in his apology.

Due to the overwhelming number of negative comments, X added a community note stating: “Pear is a fork of Continue.dev, an open-source AI code editor. PearAI used Continue.dev’s code and mass-replaced all references to ‘Continue’ with ‘PearAI’ to mislead people into believing that they built this product on their own.” This note, however, was inaccurate; PearAI did mention in some of its materials that the project was a clone (or fork) of Continue as well as the original project that Continue utilized, VSCode. X later removed this note.

Pan also apologized for how difficult it was to find that information, admitting that he and his co-founder, Nang Ang, “screwed up critically” by not being clear about their project’s origins. He acknowledged that publicly discussing their project as a fork of others’ work, without many new features, gave the impression that they were appropriating others' work as their own.

On Sunday, Continue issued a subtle warning, expressing their satisfaction with the ecosystem forming around them, while emphasizing that open source must be respected, as it is built on trust, respect for contributions, licenses, and intellectual property.

Y Combinator CEO Garry Tan defended PearAI on Twitter, arguing that there was no reason for the backlash since the project was open source under the Apache license, which is “the reason why open source is awesome.” Critics were quick to point out that PearAI changed to the Apache license only after the controversy erupted.

Additional criticism stemmed from Pan’s claim that he had “just quit my $270,000 job at Coinbase” to pursue this startup, despite it being a concept far from original. Besides Continue, PearAI also faces competition from another notable player, Cursor.

Moreover, Y Combinator has already funded two other AI code editors, Void and Melty, which did not escape the notice of detractors. In response to this, Tan tweeted, “More choice is good, people building is good, if you don’t like it don’t use it.”

Others condemned Y Combinator for including PearAI in its cohort. Blogger Sven Schnieders criticized PearAI as a sign of “the decline of YC” for accepting a company that was merely “a codebase copied from another YC-backed company.” 

On Hacker News, a platform for programmers owned by YC, one commenter remarked that this incident “says more about YC than this particular founder (lots of these types nowadays): i.e., their process, their due diligence.” Another commented, “Is it typical for VC to just throw money at projects without any sort of oversight/auditing of, oh jeez, IDK, Licensing/Legal issues?”

Y Combinator’s plans to expand from two cohorts a year to four are unlikely to alleviate this perception or risk.

This entire uproar likely reflects not only the eagerness of all VCs to invest in AI startups but also Y Combinator's particular enthusiasm for this genre of them.