Mr Stuck,

I went through this and have strong feelings about it. I think the most important answer is to a question you aren't asking.

*How to predict market demand for a new product.*

It sounds like neither you or your co-founder know how to do this, and that's the problem.

I don't have enough context to understand if the differences between you and your co-founder are unreconcilable, if they are, then maybe the answer is to move on, but if you mostly get along but are just struggling with an extremely uncomfortable and challenging situation, then here are some things to consider...

First off, learn about Nonviolent Communication. If both you and your co-founder are willing to adopt it, that should help you improve your collaboration.

Next, you probably need to cut your burn down to near-zero if you haven't already. Even if you have a decent amount of cash, if you and your co-founder still have enough control to make this decision, lay off everyone that isn't essential to servicing existing customers. If you have no customers, then cut everyone. Cut down to the smallest possible burn you can, to give you the most possible runway.

Then, address your complete lack of market research skills, either by committing wholeheartedly to learning how to do it yourselves, or by finding a third co-founder who is really good at it. What you need is someone who has a decent grasp of technology trends and value-overhang, and who is very good at doing market research interviews (customer discovery interviews), and thinking through lenses like Jobs to be Done Theory, Outcome Driven Innovation and Design Thinking. When I say market research I don't mean some proctor and gamble quant nerd, I mean a scrappy startup bloodhound. Not all "business people" are built the same, and it would be good for you to ramp up the resolution of your evaluations of people in these roles.

Then you need to come together to pick a group of people to focus on for AT LEAST 3 months. These need to be people you can access and talk to many of, and people who you have good reason to believe are all doing or trying to do very similar things. Read more about jobs to be done theory if you don't know what I mean. Here are some examples: (Startup founders, insurance brokers, nurses, teachers, parents raising two or more toddlers, robotics engineers, etc. - PICK ONE). Ideally you want to pick people who have money to spend themselves, have some authority or influence over how some money is spent, or whose work is important enough that making them more productive would be exciting to people who have influence. For example, elementary school teachers are probably not as attractive as a market as university professors, and private school elementary teachers are probably better than public school.

If your founder is sensitive about engaging in this process without certainty that you will find an opportunity that's big enough to justify the VC investment, then consider focusing on a group of people like described above with high economic leverage (e.g. fintech CEOs, data-center architects, etc.) ~ focus on a set of people doing similar things close to where the money is flowing fast.

Once you pick the group of people, you need to resist the urge to come up with any product ideas. Your next step isn't to ideate or innovate or whatever, its to go and empathize with the people. Get really fucking curious about what the people actually care about. Find a way to not want them to have specific wants. Read this again: Set yourself up to be curious about these people's actual wants, while not wanting them to have certain wants. It's way more fun to talk to people this way, you won't have the tension of "I hope they validate our idea", and they will enjoy talking to you because it will feel like therapy to them if you do it right. Ask things like "What's the most important thing to you that you are the least satisfied with?", and "What else?", "if you could wave a magic wand...?", ask follow up questions, "has anything changed about that recently? Is it getting worse? How does it work today? Why does it work that way? How important is that step?, etc.", make sure you understand all their answers. Listen actively. Stay curious. Empathize.

Consider reading The Mom Test.

You will be better off paying the targeted interviewees hundreds of dollars to spend an hour talking to you (2-3x their hourly salary), than spending that money on employees helping you flail around. If you can get their time for free, great! Once you start targeting a specific problem, it makes more sense to not pay for their time, since the chance of solving the problem can become the new motivation for speaking with you.

After you have talked to ~30 or so people like this, you are fairly likely to spot an opportunity (You have also started to develop a very valuable skill). What you are looking for is something that a decent segment (e.g. 30%+) of the sample consider the most important thing they are trying to get done that they are the least satisfied with, or at least in the top 3, and that you think you can make a huge impact on with some emerging tech. Whatever you do needs to genuinely seem 10x better from the customers perspective, because the new benefit has to be worth the risk of spending time and money on something unproven / doesn't exist yet. The best opportunities will come from when you can re-frame the problems they are struggling with and understand them better than any one of the people you interviewed, because you got some unique perspective from talking to many people. Just don't rush this, because it has to be grounded in the reality of their existing values.

After you gain the insight and have designed a new approach that you are highly confident at least a handful of the people will be excited about, go back to them and validate it. Ask the hard and scary questions (now with all that validation tension again), that they can and will pay money for it, or fight hard to get other people to pay for it, etc. If you did everything right up to this point, at least a handful of people will start pulling the product out of you.

When you reach this point, at least 90% of the problems you described will be gone and you will have new (slightly better) problems. This is startups. <3

If you can't bring yourself to do something at least close to what I described above, then you're probably better off moving on, since the odds of succeeding from your current situation by pure luck is near-zero. That said, I encourage you to take the courageous and responsible path if you have it in you, the world needs more of it, and you will grow a lot from it.

Sincerely,
FloorEgg