Yep exactly my experience working in a startup. When it was time to make a real product our of the shit spaghetti code they wrote to win customers with """working""" demos, it was too late. Bankruptcy followed.
Isn’t this a slightly different problem? The product built was just vapourware and not really doing the job. So customers went elsewhere when the real version didn’t appear in time? Often companies will win the customers with a genuine working product but complicated code and then hire like crazy and all the new developers struggle and want to rewrite it all. But they mustn’t because it is a working product earning money. So gradual improvement and controlled rewrites of sub areas that need to change the most are focused on to succeed. If a company has gone bankrupt because of spaghetti code of a demo product, it feels to me like the problem was the product being just a demo rather than it being spaghetti code?
You're not wrong! But IMO, the product was being limited to being only a "demo" product because the code was too bad to run extensively in production. I guess it was both problems.