Over the last year me and a friend (a colleague I work with) have been planning developing a social web service that we feel has massive potential. We both have no business experience but are technically competent and willing to learn.
From the people we have spoken to our idea in development has appeared very interesting.
The problem we are facing is as follows:
We both work in the same role during the day as we do in our venture, we are both finding that this is draining our motivation by the time we get to working on our project.
Our venture wouldn't make any real money until it is off the ground, maybe a year down the line.
Neither of us can afford to walk away from a steady income (as the income we receive is already quite low it is difficult to save).
Ideally we could both leave our jobs and work on this full time, we both believe by doing this we can create a great, popular service. And eventually earn a good income.
What would your advice be? Seek some kind of startup investment? If so, what kind of demo would we need?
First of all - you say your idea has "massive potential", which suggests a big thing, which might require a lot of resources to conquer the market. That's why you should at least consider external financing. Joel's Strategy Letter I blog post helps to distinguish between the business models that do require financing for fast growth and those that do not.
Second - you say you spent a year working on it - if no competition launched during that time it might mean there's no market for this kind of service... or that you don't know the competition... or the competition is in the stealth mode... or the market is not ready for your solution yet...
Third - "have been planning developing" - does it mean you haven't been actually developing the product (prototype)? If so this may mean you lack motivation or aren't willing to put your back into the project.
My advice would be to (re)define the Minimum Viable Product. I mean really, strip it down to the bare minimum that makes sense. Make time (yes MAKE) to build the product or at least a proof of concept that works on a test group and will show the power of the idea to the investor.
I'll throw this out there for the heck of it...
You both work at the same employer doing the same kind of work as you would for your startup. I'm not sure what the IP considerations are where you are, but in some parts of the US your current employer might own your idea. Check that out.
Either way, you could approach your employer with the idea and propose that you be given some amount of time each day to build out a prototype. You continue to perform your jobs and get paid while you work on your idea. Your employer would own part of the product if you come up with something marketable. In other words, let your current employer be your VC.
You'd need to get an agreement that you'd be spun off into your own company with your current employer retaining some of the equity, but both sides could win.
I have no experience with venture capital, but read advice from someone who does:
http://www.quicksprout.com/2009/01/21/how-to-raise-venture-capital/ (Neil Patel is one of the top names when it comes to SEO).
On the flip side of the coin, Mark Cuban totally disagrees with venture capital and states in his book that the best media companies became successes without any external financial aid. His philosophy is that if you accept funding from an investor, you've pretty much given them the reigns of the business. So from Mark's perspective, nothing beats sweat equity.
My advice is to read both sides and choose what applies to you. You can get Mark's ebook at ganxy.com for $2.95: "How to Win at the Sport Of Business, by Mark Cuban".
Please note that I do not intend this answer to sound like an ad as I have nothing to gain from either link. I have read both of these posts for my own situation and, hopefully, they'll steer you in the right direction.
If you are both "technically competent" as you say, why don't you just leave your current jobs and find higher paying ones that don't require as many hours? This should be possible, as programmers are in high demand right now. I've had friends who took dull, high-paying jobs so that they had time and motivation to pursue their startup.
I'm in the same spot as you. Only that I haven't been able to find a co-founder. This book has changed my vision totally, and hopefully in two months time I'll have a MVP. Read it. It's a game changer.
Once you have a MVP you have something to show, with can help you get funded, or start making money if you are lucky.
this is draining our motivation by the time we get to working on ourIf you or both of you are not fully committed to your idea and have trouble motivating yourselves, it's probably time to rethink what you're doing. Your mindset has to be that you will do whatever it takes to get your project launched and successful. Perhaps the idea is too ambitious. You can refine your idea, scale the idea down, or put the project on hold altogether. Even Facebook started as niche-focused community for Harvard students.
I know you're thinking you'll just apply to Y Combinator and you'll be on your way. The truth is they, along with other incubators, get over a thousand submissions and accept maybe 10. And any investor wants to see a complete dedication to the business, and not just something you tinker on after work when you feel like it.
Focus on building something you can bootstrap. Visit the Micropenuer website, read Rob Walling's blog and book for great advice on bootstrapping a startup. Or else, do some soul searching and find that perfect idea, re-energize your motivation, and maybe you'll be on the ones chose by an incubator.