One definition of a startup is "a company in search of a repeatable business model." If we have a clear idea of what the customer needs, what they are willing to buy, and have built the product that satisfies them, then we are no longer a startup, we are an established business.
Maybe we understand customers and the market well enough that we can sit in our cave, build the product, then release. But it's more likely that we will get it wrong and need to change direction. The process of building a startup is to iterate as quickly and efficently as possible to get to product-market fit before we run out of money.
The term "Minimum Viable Product" means that we define the smallest "complete" product which can be launched and satisfy a customer. A lot of entrepreneurs get caught in the trap of thinking that they know what they are doing, or behaving like it. Instead they need to actually build the product step by step based on feedback from customers.
Entrepreneurs may think that they are building an MVP, but then they do not do it. It can feel bad to make a MVP, because you show it to your friends or customers or investors and they say "is that all there is?". Or you get worried that the product will not be successful, and think "in order to be successful, a product needs to have more features than the competition", so you add more and more features to the initial release. But then you burn all your budget on building the wrong thing and have nothing left to make necessary changes or to market it.
One of the key things that drives the real MVP is marketing. You only get one chance to make a first impression, and it can cost a lot of money really do a proper marketing campaign. On the other hand, if you do a "soft launch" with your MVP, then you can get customers without having to be big and perfect. You just have to meet the needs of one specific customer who you can build on in the next release. So it's a matter of setting expectations properly, then showing progress.
You may be better off reserving say 1/3 of your budget for customer development at the beginning and marketing and sales at the end, 1/3 for initial product development, then 1/3 for a second phase of development. This ensures that you actually get a product to market. It can also bring in revenue which funds the business (bootstrapping), reducing reliance on later funding rounds.
In the film business, they have a concept of a "completion bond". It's a form of insurance that makes sure that a film can be finished when it's run out of money. Otherwise all the investors get nothing. The insurance company comes in with a hard core penny-pinching producer who finishes the film and gets it into theatres. We don't have this in startups, we just have a "distressed sale", maybe.
If you really take this to heart, there is a lot that you can do at the beginning by focusing on reducing risk. For example, you can visit potential customers and interview them about their top 10 problems. You may have a good idea, but are building a solution for problem #7 instead of #1, and there is no budget. You can get them to sign a (non binding) "letter of intent" that if you build the product, they will buy it. That helps avoid customers being friendly and supportive to talk with you, but not being really serious about buying our product.
The key is to build relationships with target customers. If we can get the customers to feel ownership in the solution, then they can become powerful advocates, e.g. providing initial references and introductions.
There is a danger that if we pay too much attention to the needs of our initial customers that we don't build a general product, we become a consulting company bulding custom solutions. (But there are worse things in life...)