Your pricing is what failed it for me. I can get a 512MB VPS from DigitalOcean for $5/month.

I love this idea, though. I just feel that your approach of giving a full VPS is a bad idea. People who want a full VPS will buy a full VPS for much cheaper than the 20GBP you're offering it for.

What you need to do is multi-tenant your hosts, and isolate them from each other. Then you'll get costs savings that you can pass on to your customer; which will put you in line competitively with the likes of HipChat and Campfire.

Great idea, can't wait to see what comes of it!