Mena Antonio, of Toi Wairarapa, and Craig Turvey, of 3D Creative, were the main organisers and praised the people who had volunteered their time.
"We're unapologetic for stepping out. That's the nature of breaking new ground. We've got the access to amazing presentation techniques, we've done our homework, and found that this is a very contemporary way to connect to a youth audience," said Mr Turvey.
Ms Antonio said the event had earned great support from councillors. They would look elsewhere for funding and were considering a future date.
Masterton Mayor Garry Daniell said the project was set to be one of the major events over summer but young people would still be able to enjoy other activities, such as the pools.
"We totally understand that we are very fortunate to have both the licensing trusts in Masterton, which really enable us to give special events ... but we also acknowledge that it's dependent on other funding bodies to enable it to happen," he said. "We just have to look at other ways of supporting this initiative."
Community services manager Jan Gerritsen said it was "disappointing" the event would not go ahead.
She said none of the money the council allocated had been spent by organisers at this stage, and they were working with them to come up with alternative options.