The bigger problem was that Chris Avellone wanted a Bloodlines sequel more than he wanted a sequel that was in good hands. He apparently assumed that given a project, the rest would fall into place. Still, without Brian Mitsoda doing the writing, it's basically got no future. Developers being used as marketing gimmicks to give a project legitimacy is fucking annoying though. Evidently Brian Mitsoda was used more as a prop to make the project look legitimate than as a proper writer, which means they decided they didn't really need or want him to take charge of the actual writing, and when you have those kinds of "my way is just better" types with their heads up their asses, you typically know you're looking at a dumpster fire. If you're making Bloodlines 2, people will expect it to be a sequel to Bloodlines 1, which means they will expect it to have a similar way of doing things to Bloodlines 1. Seeing as RPGs with good gameplay are rare (Bloodlines also isn't doing too hot here), that basically leaves you with trying to develop a similar writing style and atmosphere.
Hardsuit Labs's inexperience with making RPGs and focus on making shooters wasn't the most damning thing (Bloodlines was a first-person game anyway), but the fact that their entire list of videogame projects consists of ports, remasters, "co-development", and "engineering support" aside from one self-developed title (Blacklight Retribution - a 2012 release, F2P shooter, said to be "above average" by F2P standards) is pretty fucking concerning. Other than that you can look at
Glassdoor and find out that yep, Hardsuit Labs is into SJW things and suffers from massive turnover (1-2 notices happen every week, and this is a tiny studio), poor pay, constant mandatory crunch time, micromanagement, busybodies, and otherwise poor management (clueless, dishonest, low transparency, poor communication skills, more interest in social media than practical work, and general incompetence). That's a death sentence right there. You have a studio that has minimal experience developing games, bad management, and a development staff that is actively being hindered and burned out with massive turnover.
Fun fact: If you check out
Hardsuit Labs's website, you find out that they are now hiring! Hiring for what? Well, if the above Glassdoor reviews are any indication, Hardsuit Labs will always encourage you that there is more work coming up and opportunities are just around the corner, right until they hand you your pink slip informing you you're being laid off in just a few days.
It's an interesting question why Chris Avellone and Brian Mitsoda backed this horse, and I'm really just coming back to "They really wanted a Bloodlines sequel that they were part of" and "Hardsuit Labs is pretty good at sounding like they're decent people." The managers sound like those personable types that have good presentation skills and are good at looking professional but bad at actually doing work.
Odds are Paradox just wised up to the fact that they were throwing money down the drain and pulled the plug on them. Bloodlines 2 should be in limbo (basically dead) until Paradox shops for another developer to take over (and probably overhaul/redo the whole thing). Without Brian Mitsoda doing actual work there though, any Bloodlines 2 project is most likely going to be a failure, so you can basically keep an eye on how Brian is doing professionally for an indicator on Bloodlines 2, but I wouldn't hold my breath.