How do video game companies start making a video game
Like with everything creative, it all starts with an idea.
It can be very vague at first, but then, it's expanded, with a whole story, concept art, and more ideas, such as types of levels, deeper story, or back story, anything you would need to convince people.
Once they have enough, they will go to their boss. They will try and get him to understand your point on view, and see the potential in your idea. If you get the go ahead, work starts, but that doesn't mean that it will instantly become a game.
Video Games are or can be incredibly expensive to make. It can require hundreds of thousands of man hours, and huge numbers of resources. You have to remember that a Business making Video Games is still a Business. They need to be able to make a profit.
If at any point the company feels its not a viabale idea, will take too long or will not sell, then it can be scrapped.