The burst of the tech bubble showed the fragility of many Internet businesses.
When the Internet first became a viable opportunity for businesses, it seemed everyone in the world wanted a piece of it. When investors heard they could make money on the Web, a mass "Internet rush" took place and everyone remembers the outcome -- the tech bubble burst. The problems that caused the early Internet firms to fail still claim Internet companies today.
Funding
For many Internet businesses, the reason that they ran out of money was simple -- they didn't have enough money to begin with. It can be hard to judge how expensive a business is going to be when it first goes online. For this reason, developers seek venture capitalists before creation of an Internet company. Venture capitalists provide the money needed to keep the site up and running until the business becomes self-sustaining.
Inexperience
The greatest problem for many Internet companies is their operators are inexperienced. Someone might have a great deal of technical knowledge about set up a website, but that might not be enough to create a steady flow of customers. Internet companies run out of cash because the lack of experience doesn't create a sustainable cash flow. For example, Internet firms such as eToys and Pets.com spent millions of dollars for advertising, but never understood run virtual businesses. They learned that having special ad campaigns didn't offset their failure to understand monetize the businesses they had formed.
Monthly Bills
Inexperienced Internet business owners didn't understand how much cash they needed just to maintain the business on a monthly basis. Regardless of whether a business does well or poorly, there are monthly bills to pay. When businesses failed to take off immediately, owners used up operating capital just to stay afloat.
Customers
Internet companies run out of business and cash when they fail to have customers. In the case of some Internet startups, a site that has many visitors might have a hard time converting those visits into sales. It is analogous to a department store having a lot of people walk through its doors each day, but not buy anything. Traffic alone does not guarantee success. That traffic has to come with a way to make money.
