When I first saw VL spec I got the feeling it was not well designed. Technically (and theoretically) everything is great, with smaller connectors, faster cables, etc. In reality however, if you for example try to connect a phone with USB-C to your TV by using USB-C to HDMI cable you will notice that the connection (on USB-C side) is nothing you would want to move, nor pull or bend the cable close to it, because it is so fragile.
The worst thing is that if you attach a (really) high speed cable (either the HDMI, or 10Gbps rated USB-C to USB-C) you will see that the cables, because of the additional shielding and required impedance, are much sturdier than the connector (connection) itself.
So, USB-C (connector) may work for cases where you attach your device and then do not touch it anymore, or do not move the cable around, but I cannot image how it would work with the cable, which should be even less flexible than those named above and which should be in permanent move (as HMD cables are). Such a thing should have used something like the old DVI connector and got tightly screwed on!
Plus, in Valve’s particular example, they also had to figure out, how to minimize the impact of the dongle, as some already figured out, every additional connector on the line hinders the performance and reliability of the high speed connection.
So, in the end, I am not surprised that Valve figured that out. I am surprised that no one from Nvidia and others from the consortium did not long time before.