I did a take home project for a startup and fulfilled all of their requirements. They said the code was sound but wanted more documentation and they passed on me.
It's been infuriating to say the least.
1. You knew you left on bad terms.
2. The company you applied to asked for a reference from your previous company, which is fairly standard.
3. Previous company gave you a bad (or at least less than good reference).
Your mistake is that you should have been upfront with the new company about leaving on bad terms from your previous one. Most interviews include some form of a "why are you looking for a new job?" question, and that's your opportunity to explain at least some part of what went wrong. The fact is, as a hirer, I would treat any negative reference that a candidate gave to me as a giant red flag, because the candidate pretty much controls who they're giving me as references!
You're right. I should have.
> the candidate pretty much controls who they're giving me as references!
I was required to give three references, one of them must be my manager. The other two were positive but I had no choice about the manager reference. I also didn't want to assume they would use the opportunity to screw me. When I left they even offered me more money but I declined so I must not have been horrible at my job.
I had a similar experience with a toxic, sociopathic CEO from a previous job leading to at least one known instance where an interview process was going along just fine and got cut short after contacting that person. At first I was very worried that, given the highly niche aspect of my work, I would have trouble remaining in that part of the industry.
So I switched tactics, and that CEO has become the first previous boss I will willingly trash talk. I get it out of the way immediately and then it's a non-issue. And then I get to use the reaction as a litmus test for whether the culture will fit. Just make sure not to come across like a jerk.
It will benefit you in multiple ways, not the least of which includes honing/practicing your skills, learning some new technologies, and having something to show for it.