update their designs to account for current trends like USB-C, flexible drive, PSU & GPU mounting
They had a USB-C front panel faceplate (they are exchangeable on most of their cases). If you have an older faceplate w/o USB-C on your CaseLabs, it isn't exactly rocket science to build your own with USB-C. I've build a few front panel faceplates for my TH10A for different builds to suit my needs.
Regarding flexible drive mounts, that argument I really don't understand. It couldn't get more flexible than what CaseLabs did back then. So what exactly were you missing? Same story with PSU mounts, most of their cases had multiple locations for PSU mounts so you can choose what suits you best. The STH10 for instance had 4 possible mount locations on a tower case.
Caselabs died because they priced themselves out of the market, once competitors started making similar cases at lower prices they didn't try to compete.
That argument does come up a lot, but honestly I can't follow that logic. To put things in perspective: Most of their cases are meant for people with lots of extreme water cooling gear. I'm talking multiple radiators, most of the time dual-loop setups with (at the time) more than one GPU. So you are installing a multiple of the case cost into that case in hardware alone. Given that, I think the case cost doesn't matter that much. But on the other hand, you get a case where you can fit all that stuff and have lots of options on where to put things inside the case, which other manufacturers just don't offer. On top of that comes the build quality and rigidity of the cases. You just can't compare that to all the cheap steel cases with super-thin and flimsy sheet metal construction.
To be realistic, cases competing in the same niche of the market are also very expensive. Take for instance the InWin 928, which was used by many who previously had CaseLabs cases. This is a 1500€ case! Even the smaller 925 is ~800€ at the moment. If you look over to LianLi, most of their bigger and more spacious cases are easily 500€+ albeit not offering nearly anything close to the options you've got in a CaseLabs case and are at the same time not as sturdy as the CL cases were.
On the smaller cases that may be an argument, fair enough. But that was not primarily the focus of CaseLabs for the most part and they only started designing and selling those smaller cases to the end. So that could be improved with time, which unfortunately they didn't have.
If you make an expensive niche product, then don't have enough customers who will pay the cost, and have business problems for whatever reasons, and don't (seem) to have the large scale distribution of some other similar products, you are screwed.
I guess if you try improve/maximize profit, then you eventually land where all the other case manufacturers have landed and produce the same boring shit they produce. You can only get a case to produce cheap if you produce LOTS of them and that means you have to choose a case style that is mass-compatible and does fall apart after a few years. I mean it's rare to see innovation in cases these days, they all more or less follow the same principle and thus look more or less the same (apart from front covers).
CaseLabs themselves said back then that they were at their limit on what they can produce. They were not just sitting idle waiting for someone ordering a case. So probably they had a problem scaling up the business. That part is something that can change under a new owner, we'll see.