Every project is built in steps:
I have a concept or an idea. This is not very valuable: everyone has thousands of great ideas, and keeping the idea in your head without doing anything with it won't make the world better.
Example: a chat for cats and dogs would be so great!
I draft the concept/idea on paper. This step is important, because something purely abstract and speculative becomes a bit more concrete. It doesn't mean that it is doable, but at least it is described.
Example: a 20 pages draft explaining how cats and dogs can talk to each other online, while they are unable to use a keyboard or a mouse. It also contains my personal drawings of the thing which will be fixed on the head of the animal and plugged in the PC.
I do a prototype. Great, now, I know that it's also doable.
Example: I put the experimental instrument I created on the heads of two cats, and they were able to communicate. Sadly, one cat was burned, and the other one became crazy. Don't really care; in front of my house, there are other cats to make experiments on.
I realize a semi-working version I can use. It's not a commercial product, but it can be used by a person who is fully aware of the constraints of the product.
Example: the instrument is working fine, and it doesn't put cats on fire any longer. They can eventually become crazy if the instrument is installed incorrectly on their head. I explained the concept to my colleague. Our cats talked to each other for two hours, but then his cat jumped out of the window; don't know why, but I opened a bug and closed it as "Can't reproduce", since mine remains happy and fat.
I end up with a working product which is used by me and eventually a few other people.
Example: cats and dogs are talking together for hours every evening for the last two weeks. We're ten colleagues using it, and everybody appreciate it. Jeff's cat don't even want to go out, and spend the whole day in front of her PC. Jeff thinks about buying her a dedicated PC. Sadly, Kate's dog started biting people and was euthanized. I hardly doubt this is related to my product.
I ship a stable product to a limited number of people.
Example: we have over three hundred pets registered. The product was so successful that I finally created a company, Cat&Dog Chat Ltd. Thanks to the earnings, I even bought a new PC to Jeff's cat and hired two geeks. I may consider leaving my current job. I heard that there was a collective cat suicide in a building nearby. I hope it's not related to my product.
The product is a commercial success and achieved to become popular.
Example: we have literally thousands of pets here, it's so exciting. I hired twenty other people. The software was ported on MacOS and also works on most popular smartphone platforms. The product is very stable, and there is practically no bug reports concerning major bugs. I also prepare a new version of the product, which will enable other pets, especially birds, to talk online as well. Sadly, an old woman filed a complaint after her six cats jumped out of the window one by one after spending ten hours in front of a PC; it's time to hire a lawyer.
Few projects achieve the latest step. Most remain at the first step. Many are between the first and the last. There is nothing wrong to target one of the intermediary steps.
Each step is more and more challenging, and also teaches you more and more things. For example, at the last step, you have to have a lawyer, an accountant, salesmen, marketing people, etc. You may have been an excellent technician, but you should also be able to sell, to market, to defend your interests in court and to pay taxes.
The fact that the interviewers ask you questions about the business side of your projects is understandable. If you were interested by the technical aspects only, that's perfectly fine (for a software engineer). On the other hand, if you had successfully built a full-grade commercial product which was actually sold, it's even better, because it shows that:
Your concept was commercially viable,
You were able to do it technically,
And you were able to convince other people to actually use it and pay for it.
Does it cause a red flag that you've done only the technical part? Not at all. If they need to hire a businessman but they tell that they search for a software engineer, they are doing it wrong. So no, it's not a bad thing; just be very clear about your motives: you don't sell this because:
You don't want to.
Perfectly understandable. You may hate talking to customers, or doing accounting. This is not your job.
You are interested in technical aspects only.
Perfectly understandable. You want to focus on the things you will need the most during your career.
You tried and failed.
Depending on how a failure is presented, this can become very negative.
You don't even try, telling yourself that you'll never succeed.
Nobody wants to hire a person who don't believe in him and in what he does, so even if the candidate knows exactly why the project is not viable commercially, he should omit talking about that under the risk of giving a negative impression anyway.