Sounds like the investors made a poor choice including that in the financing agreement.

Isnt then the whole thing fault of VCs who included those covenant? The same VCs that now cry hardest?

Moreover, both startups and VCs are literally the groups that celebrate risk taking and disruption. This is it, this is the flip side of risk, the definition of risk is that you might loose. But somehow, when they loose, due to risk taking, then suddenly they want extra bail outs and help.