In the presentation, Larry avoided naming any specific products or companies. For the success stories (in this presentation, and throughout other lectures), new technology often addressed a very specific need that was not previously addressed. Failures often came from the execution. You are right that a brilliant product could address a specific need, but that need could be small enough to cause a failure — though I don’t recall such cases being discussed. I suppose they were not as interesting.

In part, I think this might also be the VC’s fault for financing a faulty idea. After all, failure to pitch an idea, doesn’t make for much of a startup company.

I meant a great product as a technological marvel, and not because of its use–the cure for Cancer will probably be a great technological achievement, even if nobody needs it (this is hypothetical, of course). In the same context and more realistic example, the Apple Newton was–to me–a great product, but was not very successful in the market (leave aside the timing issue). So marketing plays a big role in the success of a product, but marketing is not only advertising or selling (flashy content, good presentations, etc.); there is a lot more to it. In fact, I did some work for a company Larry advised a few years ago: it failed, and was not for the lack of optimistic visionaries or smart presentations.

Of course not all startups create useless things, but some did and still do. They must, it’s part of the creative process. Remember pets.com? boo.com? AdExact? Of course, there are successes: Amazon, eBay, PixStream, SandVine. So I disagree and contend that startups must create useless products and dismal ideas, as without failure there is no real entrepreneurship. And the failure is just a way for the market letting us know that the ideas/products/services sucked (including market timing).

I’m sure you may come across some of the innovation literature at some point, but I have always liked this compilation: http://www.doblin.com/ideas/TenTypesOverview.html. A startup will have an easier time selling its product if they add some value to someone–I think Larry said something similar in the presentation (note that I only watched the first 10 mins).

BTW, it’s great to get the computer science club at Waterloo talking about business fundamentals. I don’t think it has always been that way.

The profitability of the idea should be apparent from the idea itself, or from the presentation. Your example of “a cure for cancer” is not actually a “great product”, if this product is not needed. I suppose that with enough marketing, even a useless widget could be sold, but I don’t think that’s what startup companies do.

You also write: “Be able to demonstrate your capacity to produce the desired effect. One might be full of absolutely brilliant ideas, but they need an effective demo to attract clients and investors.” What is the desired effect? A flashy, catchy demo is of no interest to clients or investors. On the one hand, if a product doesn’t solve a specific needs, no one will care how revolutionary and elegant it is. Imagine a world with a cure for cancer with nobody suffering from the illness: great product, no market need. On the other hand, investors are interested in profits and long term sustainable business models. A flashy presentation can’t fake numbers and a well research market segmentation.

Good luck with all your startups.