It depends.
Does the developer has any missed deadlines? If yes, you should talk to that guy, and probably fire them if he doesn’t change. Otherwise, go to the next step.
Can it be proven they are actually working? If their deadlines are met, but it can’t be proven otherwise they are working, they may forge some records. It’s time for a serious talk. Otherwise, go to the next step.
Do these side project add value to the company? E.g. if they write libraries that are published under their name which are used in the company to make a workflow faster/easier/etc. If not, they are not really useful to the company, and their work can probably offloaded to the other developers. Otherwise, go to the next step.
Does having side project under their name allowed by their contract? If they write software in office hours and publish it under their own name, it may violate their contract; some companies like to have their developers’ work registered as their own IP, and it’s usually in the devs’ contract. If this is the case, they can even be sued, although I wouldn’t dare go down that path as a startup; unless you have good lawyers, you may get out of this worse. Otherwise, go to the next step.
Just kidding. There is no next step. If you reached this point, the guy may actually be valuable to your company. You may give them some more tasks, though, if there are any.