Claude Code VSCode Extension 60s Timeout: It Wasn't the MCPs

The Symptom

Every time I opened VSCode with the Claude Code extension (claude-vscode 2.1.112), I'd get:

Error: Subprocess initialization did not complete within 60000ms
— check authentication and network connectivity

Exactly 60 seconds after launch, it failed. The logs showed all MCP servers had connected fine. So what was blocking it?

What I Tried First (Wrong Approach)

Assuming slow MCP server startup was the culprit, I removed them one by one by connection time:

Removed	MCP	Connect time	Fixed?
1st	playwright	~8s	❌
2nd	magic	~7s	❌
3rd	code-review + github	~5-6s	❌

After removing 4 MCP servers, the timeout persisted.

The Real Culprit

A SessionStart hook in ~/.claude/settings.json:

{
  "type": "command",
  "command": "sleep 600 && exit 2",
  "asyncRewake": true,
  "rewakeMessage": "10 minutes have passed. Check your progress."
}

asyncRewake: true is not honored by the VSCode extension.

In some Claude Code modes (terminal-based), this option runs the sleep asynchronously and injects a message after 600 seconds. But in the VSCode extension, this flag is ignored — sleep 600 blocks the subprocess synchronously.

How the timeout happens:
  subprocess spawn
    → SessionStart hooks execute synchronously
      → sleep 600 starts blocking
        ← VSCode extension times out after 60 seconds

The Fix

Remove the sleep 600 hook from ~/.claude/settings.json:

 "SessionStart": [
   {
     "hooks": [{"command": "powershell ...session-resume.ps1"}]
-  },
-  {
-    "hooks": [{
-      "command": "sleep 600 && exit 2",
-      "asyncRewake": true,
-      "rewakeMessage": "10 minutes have passed..."
-    }]
   }
 ]

After removing it, startup completes in 9 seconds:

14:35:18 spawn
14:35:27 "status":"ready" ✅  (9 seconds!)
14:35:36 first message received

Why MCPs Were Irrelevant

In Claude Code 2.x, all MCP connections are fully asynchronous (non-blocking):

[MCP] --mcp-config servers running fully async (MCP_CONNECTION_NONBLOCKING)

Even if playwright takes 8 seconds to connect, it doesn't block the subprocess ready signal. Claude becomes responsive before MCPs finish connecting — tools become available as each MCP completes its handshake.