Adapted from an article which originally appeared in Inc. Magazine.
Investing in early-stage companies is investing in entrepreneurs. Understanding how they measure up is partly a function of understanding how they think, or should think. Entrepreneurship has come a long way toward being a better-understood and accessible way of life. But it will never be completely mainstream, because it’s not for everyone. Consider the temperament and skills required. Entrepreneurs need a broad skillset and equally important, a high degree of awareness about their weaknesses. It’s a lonely, difficult, risky, frustrating and sometimes scary path to choose.
Does an entrepreneur have what it takes? To help you figure that out I’ve assembled a list of key books every would-be entrepreneur should digest. Reviewing these materials will give you incredible insight into the entrepreneurial way, and will provide you with a much richer framework for understanding how the entrepreneurs you meet are likely to measure up. The list is not comprehensive - I have purposely tried to make it as short as possible. This core set of thoughtful materials will help immensely with understanding the entrepreneur’s world and evaluating whether a particular entrepreneur is likely to thrive in it.
What’s It Like and What Does It Take?
The first question an entrepreneur must resolve is whether she has it in her. Heart, Smarts, Guts, and Luck by Zappos founder Tony Hsieh (et al) is a very readable exploration of the psychology and temperament of the successful entrepreneur. A good resource for understanding the massive scope of skills necessary is the simply-titled Entrepreneurship by William D. Bygrave and Andrew Zacharakis. This book will give a basic nuts and bolts overview of virtually all aspects of the entrepreneurial process (and will serve as a useful desk reference later). If 90 percent of the material in Entrepreneurship is new to an entrepreneur, she probably has some work ahead of her.
There Is No “I” In Team
It has been said that all start-up problems are people problems. I view that as accepted wisdom. Starting a fast-growth company is too broadly taxing to tackle alone, even if one wanted to. Building a team is critical, and start-up team building requires great people skills, networking skills, self-awareness and critical evaluation skills. Low EQs (emotional intelligence) will struggle mightily.
Two books top the list for essential reading on networking. Never Eat Alone by Keith Ferrazzi teaches that one’s power is one’s network. Like the title says, networking should be part of everything one does. A second resource highly worth reading is by LinkedIn founder Reid Hoffman (et al) titled The Start-Up of You. Although it has some information on traditional careers, it offers excellent networking advice (including how to be a LinkedIn power-user). It will help readers understand that managing personal growth and professional development is the ultimate act of entrepreneurship.
Given that building a team is so important, it’s critical to figure out how to hire “A” players. There is no better place to start than Who by Geoff Smart and Randy Street. This book helps entrepreneurs figure what they are looking for and teaches a rigorous method for hiring those people. It helps to avoid the most expensive mistake in business – hiring the wrong people.
As an entrepreneur’s team comes together, there are bound to be frictions. Even after hiring well, a fast-growing organization can quickly outstrip and burn out its key people. Harvard Business School professor Noam Wasserman’s book, Founders’ Dilemmas and insights by leading venture capitalist Ben Horowitz (of Andreessen Horowitz) in The Hard Thing about Hard Things are both required reading, and, fortunately, tremendously rich and readable. Once an entrepreneur puts them down and realizes they’ve got to make some “changes,” they should pick up the indispensable managers’ guide to making personnel changes, Firing at Will, by Jay Shepherd.
Finding Your Product Epiphany
Dialing in the right product, business model and strategy is job one of every newly-formed start-up team. Stanford Business School professor Steve Blank’s excellent Four Steps to the Epiphany provides excellent learnings for what’s involved. To avoid overlooking one of the most commonly missed areas of innovation, the business model, an entrepreneur should take a run through Business Model Generation by Alexander Osterwalder and Yves Pigneur.
Product idea in hand, it’s time for a good overview of strategy, including the choices and eliminations required. I strongly recommend Understanding Michael Porter: The Essential Guide to Competition and Strategy by Joan Magretta. In terms of setting ambition level and figuring out whether one has something special, the Heath brothers’ Made to Stick: Why Some Ideas Survive and Others Die is also very helpful perspective. If readers are still thirsting for more, Guy Kawasaki’s classic Art of the Start has a few getting-off-the-ground nuggets as do “innovation accounting” concepts and key metric concepts in Eric Ries’ widely cited Lean Start-Up.
Chief Extraction Officer
A teaching colleague and friend sometimes jokes that CEO stands for Chief Extraction Officer, as in extracting and collecting the resources needed to grow the company. As an entrepreneur defines the product and raises money to pay for development, extraction quickly becomes a pressing problem. The fundraising topic is so large, and so varied, and so regional, I hesitate to even broach it, but I can offer a couple fundamental resources. VC and Tech Stars co-founder Brad Feld’s Venture Deals is a very good primer on how risk capital investing deals work. And Brian Cohen and John Kador’s What Every Angel Investor Wants You to Know, does a good job providing orientation toward what the investor audience needs to hear about a start up business. However, keep in mind that some of the best and most current material in this space can also be found in blogs.
Basic Literacy: Accounting and Finance Fundamentals
Raising money requires a basic grasp of accounting and finance concepts and how they tie to key metrics. Without these skills an entrepreneur certainly wouldn’t be able to manage funds properly even if he did raise them. Aspiring CEOs should take notice: it is permissible to have a CFO, but one cannot delegate basic competence – one must know and understand their company’s numbers. Bygrave and Zacharakis’ Entrepreneurship is a good overview, but The Accounting Game: Basic Accounting Fresh from the Lemonade Stand by Judith Orloff and Darrell Mullis covers the basics in a way anyone can understand. When an entrepreneur has made it through that, they should move on to How to Read a Financial Report by John A. Tracy and Tage Tracy. It’s an excellent guide to how financial statements are supposed to work and therefore a great guide to how to present a company’s financial narrative.
As a company begins to move beyond the early adopter customers, it becomes necessary to scale its sales and beef up marketing. Marketing genius Seth Godin has written a number of truly excellent books on the topic, but All Good Marketers Tell Stories is a good place to start. To further understand today’s world of content marketing and online customer interactions, the treatise everyone will want is Inbound Marketing: Attract, Engage, and Delight Customers Online by HubSpot founders Brian Halligan and Dharmesh Shah.
Once the initial launch-oriented marketing efforts start to fizzle out and the promising growth stalls, and decisions such as whether to quit, shift gears or revise strategies loom, entrepreneurs will find insight and solace in Seth Godin’s The Dip – When to Quit and When to Stick. Geoffrey Moore’s classic, Crossing the Chasm, is also still relevant. If their gut tells them to forge ahead, it is time for a second close reading of both Eric Ries’ Lean Startup, which will really help them dial things in and create a workable set of metrics, and Magretta’s Understanding Michael Porter to fine tune the strategic trade-offs.
Life’s Not Up on The Shelf
Can someone learn entrepreneurship from a book? No. Mostly you have to just get out there and try. Some things in life are best learned by doing. But getting grounded before heading out is common sense, and when an entrepreneur falls down really hard, a good book can provide great comfort. Most important for them, and their investors, is to keep their perspective and remember the old joke: experience is what you get when you don’t get what you want.