The version I heard was that Friendster failed to scale not because of low quality code but because the CEO refused to compromise on a feature that was inherently unscalable.
MySpace was sold to News Corporation for millions, it definitely didn't fail as a startup. There's a point where code quality becomes important, I don't think anyone's denying that, but it's after you've got traction and product-market fit.
(That was linked from http://highscalability.com/blog/2007/11/13/friendster-lost-l... but I had to fix the link, since it went to apps.ycombinator.com which must have been the HN URL at the time. Maybe dang can update DNS to make those old links redirect? Everything after the host was still correct.)
MySpace was sold to News Corporation for millions, it definitely didn't fail as a startup. There's a point where code quality becomes important, I don't think anyone's denying that, but it's after you've got traction and product-market fit.