Steve Blank says that " a startup is an organization formed to search for a repeatable and scalable business model."

http://steveblank.com/2010/01/25/whats-a-startup-first-princ...

Edit: read the above link, he also describes his idea of a business model.

So, the "repeatable and scalable business model" does NOT exist when you start :) , it will come with time. However, I do believe your business partner is also right in that you will start without knowing the end.

Have you seen Osterwalder's slides?:

http://www.slideshare.net/Alex.Osterwalder/successful-entrep...

(these are probably my favourite set of slides)

I believe the function of the business model canvas (and similar tools), is to help you think about the main points to address when trying to create a startup.

It's like a better checklist. I've seen many people stumble because they didn't think about a critical point.

Usually channels or distribution, and revenue generation are the two things many overlook when building a startup - it's nice to have a value proposition, but you need to get it out there and monetize it :)

I've never succeeded at creating a startup, so I hope others that have will help you better :) and YMMV and all that :)