Partnering with a great VC — Lessons from The Hobbit

The path of an entrepreneur can be a solitary one in its early years. At this point, entrepreneurs take on numerous roles from engineering to sales to operations and in some cases financier. But as with every great story, there comes a point where the lone hero must invite others to join their party. For entrepreneurs, this moment might come when your product is launched and begins to gather usage and the need for additional expertise becomes a necessity for growth. Entrepreneurship is daunting, and often dangerous, but when accompanied by the right team can yield great results. In a lot of ways, the entrepreneur is similar to the protagonist of a great adventure tale. For this article, we like to think of entrepreneurship as similar to the great quest from the Hobbit.

Bilbo Baggins, similar to many entrepreneurs, is on a life-changing journey fraught with danger, friendship, struggle, and victory. But for Bilbo to accomplish this great feat, he needs a strong team and an advisor who understands the terrain- enter; Gandalf the Grey. Just like any good VC, Gandalf accompanies the group through their journey and provides guidance where necessary, still allowing Bilbo to make the big decisions. There is never a time where you forget who the hero of the story is; but at every step, Gandalf is there providing support to the team.

But do you really need a Gandalf on your team for the journey ahead? Here are some reasons why having a grey-haired magical wizard on your side might help:

Recruitment: In the Hobbit, Gandalf’s surprise entry to the story is quickly followed by a surge of like-minded adventure seekers who join Bilbo the lead character on his journey. Like any good VC, Gandalf supports Bilbo as he builds a strong team to start this quest and sees promise where others don’t. VCs can leverage their network to help find strong players to join your team

Advisory and Guidance: Throughout the journey, Gandalf provides good advice to help the team navigate many pitfalls. This is clear when the team is advised to stay on the path by Gandalf but ventures off and encounters giant spiders. Similar to Gandalf, VCs leverage their market experience to guide startups to avoid decisions that could negatively impact their companies. Great VCs will freely use their insights and experiences to guide in a Socratic manner through certain challenges. Ultimately, increasing your chances of success.

Network access: Gandalf’s presence provides the team access to a wide network of magical experts whose support made the journey significantly easier. When the team is in need Gandalf calls on the Lord of the Eagles, Elrond, and Beorn who rescue the team from wargs, translate runes and give the team provisions to continue their journey.

A first-time founder will most likely not have a strong network in certain verticals or industries, Just like Gandalf, a good VC can call in the support of other experts to help founders accomplish goals or meet difficult milestones. A VC can call up contacts to help your startup meet its fundraising goals, expand into new markets, and in some cases lobby regulators.

But let’s leave Middle-Earth for a second and come down to regular earth.

Good VC support seems like the perfect package, but what’s the catch? Yes, VCs come with years of experience and a wide network to support business growth, but this comes at a cost. In exchange for support (and funding), VCs will require equity in your company and some may even require a seat on your board. You would give up some control of your company but gain a potential industry veteran who views your success as theirs and works accordingly. A VC will also scrutinize your decisions, not to belittle them but to expose their underlying flaws, and with this knowledge, founders are better able to build fail-proof businesses.

If you pick the right VC, this is a fair trade, and you can both benefit from this relationship. VCs share in your wins, losses and are some of your biggest cheerleaders throughout your company’s growth. This ensures that they will do what it takes to ensure you succeed. If you are willing to embark on the journey and give up some degree of control, VC support might be a good option.

At the end of Bilbo’s tumultuous journey, there is a great treasure, and the opportunity to change the world by his heroic efforts. Startups in the African tech ecosystem can resonate with this. The terrain is difficult, and founders take paths never traveled and create routes for others. But if they can successfully scale these hurdles, at the end of the journey is the Arkenstone.

If you need a magical wizard or an experienced VC to join your quest, send us an email at hello@venturesplatform.com or fill out this form