Gandalf the Venture Capitalist

Is the hobbit’s mentor the perfect advisor for the startup journey?

Riz Virk
6 min readDec 22, 2013

Last weekend, the second part of the Hobbit trilogy of films by Peter Jackson, The Desolation of Smaug, was released and, as usual, I think there’s great inspiration for entrepreneurs, venture capitalist and investors in the form of Gandalf the Grey.

I’ve been a big fan of the Hobbit since I was a little kid, and it’s gratifying to see my favorite characters brought to the big screen. I feel like I’ve been journeying with Bilbo Baggins in my mind for as long as I can remember, from the soft meadows of the Shire to the warmth of the Last Homely House of Rivendell, through the depths of Mirkwood and Laketown, into the Den of the Dragon itself, under the Lonely Mountain.

In the second installment, Peter Jackson introduces a new scene that chronologically takes place before the Hobbit proper story began: In the village of Bree, Gandalf convinces Thorin Oakenshield that he should try to go on a Quest to reclaim their treasure, setting up the whole adventure in the first place.

This extra scene, and some of Peter Jackson’s commentary on the extended edition of the first film (The Hobbit: An Unexpected Journey) made me think more deeply about the role that Gandalf plays in this “unexpected journey” to claim the treasure: sometimes as an advisor, sometimes as recruiter, sometimes as a participant, and sometimes as a concerned stakeholder. Gandalf’s multiple hats (pointy and otherwise) remind me of the roles that a really great investor/mentor or venture capitalist can play in our own startup journey.

For many, the startup journey resembles the Quest of Bilbo and the Dwarves: full of pitfalls, unplanned detours, hair-raising near misses, and unexpected appearances of both friends and foes. Like the Quest in the Hobbit, while there is potentially a lot of real Gold at Journey’s end, a startup adventure is fraught with the perils of mastering our own emotions: fear and greed, courage and compassion, stubbornness and open-mindedness.

In these films we see Gandalf masterfully guiding the company, sometimes through persuasion, sometimes through sheer force, sometimes through cunning and guile, and sometimes through what seems like magic, through rough roads and challenges that could easily have waylaid the company and marked the premature death of their entrepreneurial journey.

If Gandalf was a VC, he would be the perfect “older and wiser” counselor to a team of adventurers (the startup team), stepping in when he needs to be hands on, and stepping away to let the founders spread their wings, always available to give advice when needed, all the while keeping his eyes on the “bigger picture” even as the founders are down in the weeds of the day-to-day challenges of running a business.

Here are some specific instances from the Hobbit to illustrate what I mean:

  1. Gandalf sees an opportunity and recruits a CEO. In the new scene, Gandalf meets Thorin in Bree (“this isn’t an unexpected meeting, is it?”), and convinces the Dwarf prince to go on the journey to reclaim his homeland. Gandalf is seeing a bigger threat to Middle Earth — a broader market if you will, and he sees that Thorin’s background would fit nicely, if he could be convinced to run this one adventure. An effective VC or advisor keeps his or her eyes on the broader market opportunity, and really great ones will actually encourage entrepreneurs to start companies to take care of specific niches in this broad market.
  2. Gandalf sees something in Bilbo that others don’t. Gandalf decides that the Company needs a burgler, an everyday sort who can get in and out of the Dragon’s Den without raising suspicion and inviting disaster. The others think that Bilbo doesn’t have the courage or werewithal to go on such a journey (neither does Bilbo himself!). A good VC or angel investor or advisor can sometimes see things in us (or in team members) that we might not see in ourselves. I’ve often thought that if people really knew how difficult running a startup can be (compared to the popular myths), many would-be entrepreneurs might never start on that journey. But as in Zen, not-knowing can be a good thing, because it allows us to come up with fresh solutions to the problems that inevitably crop up. This is what happens with Bilbo before the end — he finds fresh solutions and finds himself in the process — all because Gandalf saw something in him that he didn’t see in himself.
  3. Gandalf convinces people to do things that will help the journey, whether they know it or not. In the movies, it’s clear to Gandalf that they need to go to Rivendell, though Thorin is resistant and doesn’t want help from the elves. Gandalf also recognizes that if Elrond knew the true purpose of the dwarves journey, he might not help them at all. Finally Gandalf realizes that if the dwarves ask the White Council for permission to go on this Quest, it will be denied. In my opinion, this is one of the great ways that we see Gandalf’s age, experience, and knowledge of human (not to mention dwarvish and elvish) nature really shines through in the movies (even if it deviates slightly from the books). He gets Thorin to go to Rivendell out of need (CEO’s are much more receptive to advice during a crisis), he withholds enough information from Elrond so that he helps to decipher the map (a moment that Peter Jackson says gets Thorin to “truly” trust the wizard implicitly), and then counsels the dwarves to leave on their journey before the Council (let’s call it the Board of directors) can tell them no! Sometimes in startups, people don’t see the whole picture — they just see their little sliver, and it’s necessary for someone (preferably someone older and wiser who can see the big picture) to show them partial views they can understand, until they are able to embrace their role and grasp the bigger picture. And sometimes in a startup, particularly if you are going down a risky path, it’s better to ask for forgiveness afterward than permission beforehand, especially when that permission will most likely be denied!
  4. Gandalf’s prior contacts get the company out of many scrapes and keep the Quest alive. Without Gandalf’s prior contacts, ranging from Lord Elrond to the Eagles to his knowledge of Beorn, our heroes would have been toast — literally in the scene with the Goblins and Wargs setting the trees on fire. It turns out that in a past life, Gandalf had helped out the king of the Eagles, and this brings the Eagles in to help the company get out of the frying pan and the fire! Whether it’s making an intro that leads to a big customer, or bringing in extra cash to keep the company alive, or helping a company get acquired, a good VC or advisor utilizes their rolodex to help out the team in ways they couldn’t do themselves. Sometimes, this means calling in favors from people they have helped in previous lives!
  5. Gandalf steps away to let Bilbo and the company spread their wings. At certain points in the adventure, Gandalf steps away from Bilbo and Thorin and the Dwarves, off on urgent business. It’s during his time away that Thorin and the dwarves really develop confidence in themselves and particularly in Bilbo. Moreover, Bilbo develops confidence in himself and saves the party several times. It’s important that any startup founder or CEO or leader be able to deal with situations on their own, without always relying on their advisor, mentor. Sometimes this leads to mistakes, but overall it builds the courage, character, and inventiveness of the team. A good entrepreneurial team, no matter how they start up, should end up with much more wisdom, self-knowledge, and confidence in themselves by the end of the journey, whether the venture is a financial success or not. A good advisor or board member knows when to step away, and when to engage more deeply.

These are only some of the ways that I think Gandalf brings wisdom, experience, contacts, perspective, and compassion to work in what might otherwise be seen as a purely selfish journey that ended in failure. Even Bilbo, who doesn’t like “adventures” because they “make you late for dinner” ends up better off because of Gandalf’s role as an advisor and mentor to the company.

Venture Capitalists, investors and advisors to startups would do well to watch these films again and pay attention to Gandalf the Grey!



Riz Virk

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