Ask HN: Entering a highly saturated market with the new business

I have a side project for some time now (cloud communications thing) and for me it seems pretty mature (well, mature for two-people project) at the moment. I would like to give it more publicity, i.e. gain customers, and maybe talk to investors.

The market I'm targeting is pretty saturated now -- smaller companies like Sipgate and giants like Google (with Google Voice) all present there. I would not compete with Google, but I would try to launch in the countries where Google Voice is not available yet to get the share of the hype results. In those places I have to compete with smaller locals.

Smaller locals are usually basing their services on the hardware solutions (meaning no new services could be launched quickly, functionality is limited and innovation is restrained); our approach is pure software. As a small team we implemented the bare minimum of the needed functionality, so despite the fundamental advantage we potentially have (their vendor-locked hardware vs. our open software) no market advantages are visible to the customers yet.

What would you do in this situation? Release anyway, even if the product now hardly could compete? Try to find investors and deliver more functionality? Anything else?

Thanks for the advice.