You didn't mention WHY your project is different from / better than the 10-12 competitors ... or WHY the world needs yet another startup offering a somewhat redundant service.

If your idea really is pretty much like other projects – projects that have a significant head start on yours – then maybe you could compete if you were unusually experienced or well funded. However, by your own admission, you're not.

Plus, you're obviously facing a crisis of confidence. Without knowing anything about your project, the mere fact that you've got cold feet is a very strong indicator that you ought NOT to pursue this idea any longer.

Quit! That's my recommendation. You and your co-founder can take a break and brainstorm some new project – something the world doesn't have already, something where you don't have 10-12 established competitors with more experience and funds than you have, something where you feel sure you can achieve something.

Don't waste your time and energy reinventing the wheel or chasing runners in a race who started before you and who might be intrinsically much faster. Search out some idea that's unique, necessary, right for your talents, and makes you shout "Eureka!"