There is an excellent thread on quora about why startups fail, I will highly advice everyone to read it. Here are some of the points from it to which I also agree as I have seen them by myself
1. Market is not there – before WorkMonk, I myself have built products/websites which never took off as there was no market for it, infact I think I built them without even checking if the market is there or not.
2. Not enough traction – you can’t run a startup for 3 years without making money specially if you don’t have any money, this is why getting traction is very important for startups specially for B2C
3. Being first time entrepreneurs – This happens a lot in India where the founders fundamentals are right as well as they are building a nice product but just because they are doing it for the first time, they make more mistakes which eventually leads to downfall.
4. Founder Quit/Team split – Happens way too often, specially in India, too much ego involved
5. Lack of adaptation – keep on doing same thing when all signals are saying that it won’t work and you should tweak/change it.
6. Wrong allocation of resources – premature scaling is one of the biggest reason for startups to getting failed. Spending too much on hardware
7. Running out of money/limited resources – normally this happens when “one or more” of the above applies which eventually leads to the closing of startup.