Once we have an MVP and can show traction, would we be able to find investors so that we can grow rapidly and capitalize or is this market to small.
Why seek investment? You've got the knowledge, the connections - boot strap it? Unless I'm missing something that you haven't described.
Do the more sure thing and have it fund your other ideas later. Besides, it sounds like you have tremendous domain experience in the niche market and that would also increase your odds at success.
To me, seems like a no-brainer. But you may have left out some crucial details...like: It would take us 2 years and 10 engineers to build the b2b solution or we can only succeed if we are able to get funding for reasons x, y, z. Or something like that.
I would love to have a product in niche market capable of generating 5M to 10M with 60% profit margin year over year.
My biggest concern is am I playing it safe, on one hand, I know we can make money with the niche product and we are already active in the industry so it might be foolish to pass up the opportunity, but I would say we are more passionate about the bigger possibilities for the consumer space.