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If anybody out there have any tips on how to test the interest of an idea with min. investment I would be glad to hear from you. I actually put a bounty on this topic on http://answers.onstartups.com/questions/28835/how-to-find-th...

From this story I have to say that it is difficult to get meaningful conclusions from the google adwords research tool when the idea is very niche and original. Also talking with random ppl on starbucks wouldn't get me anywhere. The splash "coming-soon" site with email sign up for site updates is one of the best tips I've heard so far (read it first on the start-small-stay-small book), but that kinds of requires commitment to start developing, leaves a lot to subjectivity on what conclusions could I reach to if after a month I have X email addresses from interested visitors, and who will come to visit an empty splash site and leave their email anyways?

Anyhow I don't think there is any easy solution for this, but if you can provide tips either in here or in the question they will be welcomed.

Been actually getting a lot of questions about this lately, think I'll write a post on it. But here's a short summary: Example I was creating a product in women's apparel so I would go to a bar, find a group of women, and buy them a round of drinks, the women would talk for hours about the subject (as an added bonus it also helped the social life). Don't underestimate interacting with the customer and seeing how they use the product. Instead of asking, do you like this, find out why and how they come to their decision.

When I do web products, the UX, I'll create a wireframe/mockup then find people and ask the question, "How would you do X". Then see how they think through the interface. After a couple iterations I'll create a quick web app to test varying hypotheses.

Another tip, I do this when forming a pricing strategy, is to form a few cases (X price with Y features). Then see which the person picks or test one at a time and see which gets the most responses. You can do DOE or multivariate analysis and come up with a near optimal solution.

I guess it's easier if you can locate and chat your prospective users, but what can you do if there is no coffee shop where you can find a group of 5 prospective users? I mean I don't know if they exist, much less I can interview hem
How about on the internet? If you can't find 5 prospective users online, then quite likely you don't have a market.
I am wondering about the best way to set up a prototype website. It seems fairly straightforward to register a domain in your own name, build a simple site with limited functionality, acquire enough initial users to demonstrate interest, and then pursue funding. But does something simple like registering the site in your own name cause problems later? Do you need to set up a business structure of some sort from the very beginning?
You don't need to worry too much about the business structure at that stage, where the project is nothing more than the idea, in particular not if you haven't got a co-founder. The domain ownership can always be transferred to the business later.
Not a lawyer, but I think there's absolutely no problem with donating/transfering/selling the site to the business when the time comes.
This is the exact idea behind the 4 Hour Work Week by Tim Ferriss - rapid testing, finding a niche, etc.

If you're interested in this idea you'll likely find value in reading the book.

The "start small, stay small" goes into detail on using this strategy. I would highly recommend it, works well.