According to several former developers interviewed by YouTuber Who Needs Normal?, the development of SpongeBob SquarePants: Revenge of the Flying Dutchman were exceptionally difficult. At first, it was plagued by technical problems with Kalisto Entertainment's proprietary game engine, which required constant updates from the company's French headquarters before the U.S. team could continue working. Communication with Kalisto France worsened in tandem with their finances, culminating in the company's closure during development. Rather than abandoning the project, much of the development team formed a new studio, BigSky Interactive, and worked to reprogram the engine into something more practical while trying to keep the game on schedule.

With limited time and resources, several planned features, including Game Boy Advance connectivity for the Nintendo GameCube version, were cut or replaced. The rushed production also contributed to technical issues that remained in the final release, including a loading screen bug in the PlayStation 2 version that could corrupt or erase save data. Development was further complicated by a strained relationship with publisher THQ. As deadlines approached, funding became increasingly inconsistent, forcing the team into extended, stressful crunch periods. By the final months of production, BigSky had laid off much of its staff in an effort to finish the game on time. Although the game ultimately shipped, the studio closed the following year, making Revenge of the Flying Dutchman its final completed project.