Would something else that wasn't a VC-funded startup really work better? The technical problem seems fundamental.

Yes, the technical problem is fundamental. But if Deno managed to be a truly great runtime that solved a lot of people’s gripes with Node and made ES modules etc the price of admission for using it there would have been momentum to create a new module ecosystem.

But once you add that NPM compatibility layer the incentives shift, it just isn’t worth anyone’s while to create new, modern modules when the old ones work well enough.

It all feels similar to the Python 2 vs 3 dilemma. They went the other way and hey, it was a years long quagmire. But the ecosystem came out of it in a much better place in the end.