I can't think of any startup that's failed from over-emphasizing both of these points together, but I can think of a few that died from following each of them in isolation. For example:
The startup I left in September has now been around for 7 years. They're profitable (obviously; otherwise they wouldn't still be around), but don't have product-market fit: they have fewer than a dozen customers and need to go through a laborious and often fruitless sales process for each new customer. IMHO, their problem is that they're too focused on "Don't stop" and not enough on "Build something people want." When one of their product ideas fails in the marketplace, they usually assign an engineer or two to maintain and update it, in the hopes that if they add a few more features or make it a little faster, someone will buy it. As a result, they had something like 7 products when I left, only three of which were bringing in revenue. They might get much farther by concentrating resources on really trying to get a breakthrough with one product than scattering their resources across 7.
It's harder to find examples for companies that made something people want and still failed, but they're out there. AllAdvantage.com comes to mind: they gave away free money, lots and lots of people wanted it, but they still failed because they weren't making more money than they were giving away. Friendster too, sorta: lots of people wanted them, enough that it killed their servers, so nobody could get to them, so everyone went to MySpace. Both of these were at least indirectly because they didn't view the startup as a long haul and work out a sustainable infrastructure.
I have no idea what Stage6 offered, but I find it hard to believe that they wouldn't be able to get (more) funding if they had passionate users and dramatic growth.
Making money is, of course, another can of worms. I could start a business of sending everyone $100 (for free) and I'd see a lot of love and growth. Maybe that's what Stage6 did? If they can't make the argument that scale can get their total cost down enough that $2.50 CPM could support it, then they are "buying love", no?
They offered high-definition videos, using a DivX web player.
They got something that users want (I used their product, and I'm not alone), but they didn't cope well with success. And after serious political issues they closed. More info: http://news.ycombinator.com/item?id=124574
Nice, I've wanted to write something similar for a while.
However, even the "don't stop" one has the counter example of "fail early" and "know when to give something up and move in a new direction". That doesn't mean stop altogether, of course, but it may mean giving one thing up for another.
I find the advice "make something people want" is not catch-all.
How are you separating want and need?
People want McDonalds or Starbucks. But if they live in a cold state they NEED heat, which will require natural gas, electricity, coal/wood stove, or solar power -- or some other type of fuel (i.e. hydrogen, nuclear, etc.)
Maybe because everybody is only thinking technology applications, it makes sense, but I think the focus on "what people want" is a little misleading.
Think of the products you use and consume daily, and you will see there is a certain quantity that you need but may not want or like, and a certain quantity that you want, but may not need or be able to afford.
Creating something people want, although great advice, is not the end-all and be-all of startup advice.
while making something people want is obviously great advice, sometimes it gets applied in a detrimental way by implying that if you don't have users it's because your product isnt't right and you need to lock yourself away and hack some more features and then you'll have something people want.
In reality your product might be just about good enough but you're not paying enough attention to smart distribution methods and thats the real cause of slow growth.
That's a great point-- one of the recurring themes we hear from speakers at YC is "you can't underestimate the importance of distribution".
That being said, I'm always a fan of nailing the most important distribution tool there is-- word of mouth-- before focusing too much on anything else. If you can't tell 10 people about it and have them be excited enough about your product to tell a few more, then distribution is really just pouring water into a leaky bucket.
Facebook apps are a fine example of distribution-mania that ventures into the realm of unhealthy. Turns out, no one really wants a lot of those apps-- so their active userbases are dramatically declining.
The startup I left in September has now been around for 7 years. They're profitable (obviously; otherwise they wouldn't still be around), but don't have product-market fit: they have fewer than a dozen customers and need to go through a laborious and often fruitless sales process for each new customer. IMHO, their problem is that they're too focused on "Don't stop" and not enough on "Build something people want." When one of their product ideas fails in the marketplace, they usually assign an engineer or two to maintain and update it, in the hopes that if they add a few more features or make it a little faster, someone will buy it. As a result, they had something like 7 products when I left, only three of which were bringing in revenue. They might get much farther by concentrating resources on really trying to get a breakthrough with one product than scattering their resources across 7.
It's harder to find examples for companies that made something people want and still failed, but they're out there. AllAdvantage.com comes to mind: they gave away free money, lots and lots of people wanted it, but they still failed because they weren't making more money than they were giving away. Friendster too, sorta: lots of people wanted them, enough that it killed their servers, so nobody could get to them, so everyone went to MySpace. Both of these were at least indirectly because they didn't view the startup as a long haul and work out a sustainable infrastructure.