Let’s face it, building, growing and running a business is hard. Regardless of your industry, you need to master several core areas, starting from your own psychology, recruiting, sales, fundraising, cultivating company culture, management best practices, and so on, to endure the game.
As an entrepreneur, you need to understand the fundamentals of all of these core areas. If you are a first-time founder, you by definition are not experienced nor have enough knowledge on all of these core areas. This means that you need to learn on the go. And because you’re busy, you need to be careful with your time. Besides building the business, you should think, with the limited amount of time that is left for learning, how to utilize that most effectively. Which are the most useful sources to learn from to build the best foundation of all of the core areas.
My experience is that the quickest tips and tricks you can learn one-on-one from other successful entrepreneurs or investors you have a good relationship with. What you will learn from them, is customized to your situation at hand. This is the most effective way of learning, considering the time used and how quickly you can put the new learnings into practice.
However, that is not enough, also you might have not these people around you. If you are only learning “just-in-time”, instead of taking the time to build the foundation, you’re building an incomplete picture in your head.
Besides learning from other people, I’m constantly reading books. And apparently, it’s not just me. All leaders are readers. Many successful CEOs say they read about one book per week, that is about 50 books per year. The median American adult reads 4 books per year. That’s a drastic difference in the knowledge and mental models compounded over the years.
My approach to effective reading
Firstly, when there is a new area I need to master, I research the 2-3 best books written in the field and immediately order them. When I mean with ‘best’ book, it’s not necessarily the latest. I try to stick with the books that have endured the test of time, and that explain the basic fundamentals really well.
Secondly, when I am for example recruiting, I will prepare myself by skimming through the best book on hiring and its blueprints. By doing so, I immediately utilize the mental models in the book, put the learnings immediately into practice, and save them in my long-term memory. I also subconsciously prepare myself for the task at hand. Reading a book is like an instant motivation injection. The better the book, the more ToDo-points it generates for me.
Thirdly, I try to read every day. Anything between 30 to 60 minutes. It’s not much, but puts me above 95% of everyone else. Knowledge and mental models compound. There is really no hack to learn or read faster. It needs to be a habit that I enjoy doing. For me, mornings are the best time to read — anything I read in the morning, sticks in my memory.
To summarize — Mikko’s formula for effective reading:
You need to find the best books in the area of learning (and discard the rubbish)
You need to (re)read these books when they are relevant to you
You need to build a habit of reading every day
I’ve read plenty of non-fiction books. And browsed and explored a big stack more. I can tell you, there is a lot of rubbish out there. Avoid the rubbish. If the book is rubbish, just stop reading it and move to the next one.
In this blog post, I’ve identified the absolute best business books, one book per field. Below is a summary. The name of the book first, and the field in the parenthesis.
The Almanack of Naval Ravikant (Principles about wealth and happiness)
The Hard Things About Hard Things (Entrepreneurial psychology)
Founder’s Dilemmas (Avoiding the common pitfalls)
Delivering Happiness (Cultivating company culture)
Venture Deals (Fundraising)
Who - The A Method For Hiring (Recruiting)
Scaling Up (Scaling up and managing the business)
I have read all these books, some of them several times, and vetted they are simply great. I utilize the mental models from these books all the time. The books and their models are part of me. I notice using quotes from these books with my friends. Besides me, there are plenty of other respected people who have simply praised these books. I can guarantee these books are solid and not waste of your precious time.
Btw, I initially wanted to include a book on sales in the list below. However, I have not found a really good one which I’d recommend. It really depends whether you’re selling a B2B product, a SaaS product, or something else. I’ll leave it to your homework to find the best sales book in your field.
If you’re wondering from which book to start with, as a general rule of thumb, the first three books (The Almanack, Hard Things, and Founder’s Dilemmas) are better suited before you have founded a business, or soon after founding the business. The last four books are better suited after building the business for some time, and when preparing for fundraising, recruiting, and scaling up. So, the books are in somewhat chronological order in terms of the lifetime of building a company.
1. The Almanack of Naval Ravikant - A Guide to Wealth and Happiness
Authors: Naval Ravikant & Eric Jorgenson
This is the best book I’ve read in a long time.
It’s a compilation of Naval Ravikant’s (CEO at AngelList) life wisdom, in the areas of entrepreneurship, happiness, health, philosophy and so on.
The books is divided in two parts, the first part is about business fundamentals, and the second part is about happiness. Naval argues that building wealth and being happy are skills we can learn.
If you’ve been in business already for few years, the first part might be pretty much common sense. It’s still useful and quick read.
However, the second part is simply pure gold, pure wisdom. It’s so easy to get too immersed in building business, and this book can keep you in check of all the other important areas of your life.
Naval words-smiths simple truths in life in really clever way. The wisdom and mental-models stick. I’ve been able to utilize wisdom from this book in practice already several times, and I notice quoting the book to myself and to other people when people reach out to me for advice.
My favorite quote on the book: “What is happiness? Happiness is a state of being without desires — you are content with what you have. What is desire? Desire is a contract with yourself, to be unhappy, until your desire is fulfilled.” So, in order to be happy, it’s a good idea to be really aware what you desire, and how many things you desire at once. Just reflecting this simple wisdom has improved my decision making in practice already couple of times.
At the end of the book, there is a list of recommended books included with short comments. It’s pure gold, and leads you to explore people like Jiddu Krishnamurti, Charlie Munger, Dale Carnegie, Marcus Aurelius, Osho and many others.
2. The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers
Author: Ben Horowitz
Just as Ben Horowitz writes in the synopsis: a lot of people talk about how great it is to start a business, but only Ben Horowitz is brutally honest about how hard it is to run one.
I’ve personally met many entrepreneurs, who have raised a lot of funding, whose businesses are doing pretty well, who have a hired bunch of people. And many of them are visibly quite stressed and not happy. And they’ve privately said to me “Mikko, look. I didn’t sign up for all this when I started.”
The first one or two years setting up a business is fun, but after getting real customers, investors, a larger team, the game changes completely.
It’s difficult to understand the psychological burden all growth entrepreneurs are carrying in their head. Some are able to mask it better than the others, but all of them have it.
Hard Thing About Hard Things is the best description of this mental state. This book is best read before you’ve decided to hop from a safe 9-to-5 job to become a growth entrepreneur (and assess if it’s really something you want), or for people who’ve recently founded their business, to mentally prepare what is ahead should they set a high ambition.
Ben Horowitz tells his personal story of founding a company, and describes the psychology behind many difficult situations he faced. Like — really difficult situations you cannot even imagine. The book is a constant swing between success and horror. It’s a first-row seat to mental rollercoaster of the growth company CEO.
(On an another note, if you’re interested in understanding the psychology of growth entrepreneur, written by real psychologist, article by Arzhang Kamarei is the best article I’ve found, and it’s pretty darn accurate. It also make several references to Hard Things About Hard Things).
3. The Founder's Dilemmas — Anticipating and Avoiding the Pitfalls That Can Sink a Startup
Author: Noam Wasserman
I got introduced to this book while taking the most useful university course I’ve ever taken at university: Entrepreneurial Leadership by Aino Tenhiälä.
The course staff had made a stretch and invited 15 CEOs of growth companies to share stories of their business, and 10 page confidential stories were distributed to the students beforehand, with content you never found in public sources. After studying them carefully, these CEOs came personally for a two hour session to answer any questions. And boy, there was lot of questions, and lot of great insights. As one can imagine, pulling this kind of course was one-time effort and was organized at this level of quality and preparation only once, as far as I’m aware of. Big credits to Aino.
The book that was used as a framework for the course was Noam Wasserman’s The Founder’s Dilemmas.
The book explores key dilemmas throughout the lifespan of a company the founder needs to make: pre-founding (whether to become a founder or not), the team (whether to partner with co-founders or not), equity split and vesting, dividing roles, rewarding, funding options, hiring, salary negotiations, board management, all the way to exit.
What makes this book so great, is that it’s based on solid research. Wasserman uses a dataset of 3,600 startups, nearly 10,000 founders, and 20,000 executives. The dataset comprises US survey results covering the decade of 2000-2010, most of the data coming from technology companies and the remainder from life sciences.
Wasserman uses both research-backed arguments and anecdotes from real companies. This format enables you to form good mental models and helps you to understand who you are as an entrepreneur. What you really want, and what are the hard statistics that happen in the markets. E.g. do you want to be the Rich or the King, clinging more to the control in the venture, or clinging more to the wealth creation? Or some balance between the two.
One should read this book before founding the company: To get the equity split, vesting, all these basic things done the right way.
Here is good summary of Founder’s Dilemma in the form of a Harvard Business Review article by the author himself for those who want to get a peek inside the book.
4. Delivering Happiness — A Path to Profits, Passion, and Purpose
Author: Tony Hsieh
Delivering Happiness, is a combination of personal biography of Tony Hsieh, and stories of the companies he built, especially Zappos, the huge e-commerce company selling shoes that was acquired by Amazon.
The biggest takeaway in the book are 1) “Tony’s Happiness framework” and 2) How to identify and foster the company culture and 3) How to think of customer support.
Tony’s Happiness framework:
Tony’s Happiness framework has four pieces. 1. Perceived control: people need to be in control of their own fate. 2. Perceived progress: people don’t like to feel like they are not going anywhere. 3. Connectedness: there are numerous studies showing engaged team members are more productive, and that the number of good friends one has at workplace correlates how engaged the employee is. 4. Higher purpose: People need to believe in something bigger than themselves.
Company culture:
Identifying and fostering company culture is another great takeaway from the book. Tony writes that :
“Even though our core values guide us in everything we do today, we didn't actually have any formal core values for the first six or seven years of the company's history, because it was something I'd always thought of as a very ‘corporate’ thing to do. I resisted doing it for as long as possible. I'm just glad that an employee finally convinced me that it was necessary to come up with core values--essentially, a formalized definition of our culture--in order for us to continue to scale and grow. I only wish we had done it sooner."
"Our core values should always be the framework from which we make all of our decisions...Make at least one improvement every week that makes Zappos better to reflect our core values. The improvements don't have to be dramatic — it can be as simple as adding in an extra sentence or two to a form to make it more fun, for example. But if every employee made just one small improvement every week to better reflect our core values, then by the end of this year we will have over 50,000 small changes that collectively will be a very dramatic improvement compared to where we are today.""
I have explored the formation of core values in my other blog post at Ambronite blog, and we used Tony’s blueprint to formulate Ambronite Core Values mini booklet. I found out that the process of it is even more important than the outcome. When you engage your team identifying and agreeing on the values, everybody becomes more committed. It’s strange how positive impact it had, and quickly people started to argue different decisions based on the core values.
Philosophy on Customer Support:
If customer support is a critical function in your business, the mental models in this book are really useful: Tony argues that customers are made happy by developing relationships, creating personal connections, and delivering “wow” effect every time the brand engages with the customer. Number one driver of growth for them are repeat customers and word of mouth. They like to invest in customer service instead of paid advertising, and let customers do marketing via word of mouth. Contact info on the website is easy to find. Call center interaction is used to increase word of mouth marketing and lifetime value, by making a personal connection. Each call is an investment to build the wow brand, not an expense to be minimized. They build engagement and trust, rather than buzz. Loyal repeat customers are treated with surprise upgrades. Customers are sent to competitors if they can’t help them directly.
That’s something. My personal practical takeaway we implemented at Ambronite was to foster relationship with our best customers. We took a list of our monthly subscriber customers ordering our meal-shakes, and sent them a surprise: Ambronite shaker bottle with their first name laser-engraved in the bottle. That was one example how we created “wow” effect to Ambronite’s loyal customers.
Finally, if you decide to read this book, I recommend speed-reading the first half. The useful stuff comes at the second half of the book.
5. Venture Deals — Be Smarter Than Your Lawyer and Venture Capitalist
When I was started to prepare to raise funding in the end of 2014, there were somewhat limited sources of good advice on how to run the fundraising process. Now there’s a ton, in any medium imaginable, such as YouTube and blog posts.
That said, in my books, nothing beats a great book. If you ask any seasoned entrepreneur, Venture Deals will be their go-to-recommendation of the best book on raising funding.
This book contains so much great knowledge and tips that it’s impossible to summarize. Just to pick few learnings from the book:
You need to understand The Players in the game (e.g. talking with General Partner instead of associates — associates are just mining the markets, GPs are making the decisions).
The book also describes the process and materials you need. — For e.g. VCs haven’t seen a business plan in more than 20 years — A pitch deck with 10 slides and supplemental material is what you need. Also, in the financial model, focus on getting the potential expenses right, forget about nailing the revenues. Ask VC for references. Reach out to entrepreneurs of their portfolio company CEOs.
Term Sheet — The book explains the most important features of the term sheet. Pre-money and post-money. It’s good to understand that some VCs will try to stick the option pool in the pre-money valuation. You must have BATNA to be able to negotiate good economic terms. The valuation will depend on many things, and competition aside, it’s the stage of the company, numbers, team’s experience, and so on. Typical vesting is four years with monthly installments and 1-year cliff, created to incentivize co-founders to commit for the long-term so that their ownership gets gradually ‘vested’ over a four-year period every month.
The book is written from the perspective of American legislation, namely from the Delaware C-corp perspective, so if you’re incorporated in Europe or another jurisdiction, you need to consult a local lawyer to explain the key provisions. Based on my experience, there are major differences.
Negotiation tips are also a great part. To get good results, understand that personal relationships are the most important. Protect these regardless of what happens to a deal (e.g. No means no). Talk to mutual contacts. Understand the deal structure and closing process. Get a really experienced lawyer who has closed several similar deals — it is worth every penny. In general, make effort to understand who you are dealing with. Always be transparent.
And finally, never make an offer first. When we raised our seed round, I never directly asked anybody to invest. I presented an opportunity, met with the investors who were interested in, and after talking for an hour, the investor themselves made a proposal if they were willing to proceed further. If they were not interested in proceeding further, it was an enlightening conversation in any case.
Personally, I’m also grateful that Venture Deal book was already out. We successfully raised our seed funding round from seven investors. For all the over $1M USD I’ve raised in aggregate, I’ll give a big chunk of credit to this book helping me to learn the process.
For the first-time founder, raising funding can be an intimidating process.
What I personally learned, is that while you need to master the process and the lingo (e.g. what all these mean: pre-money, post-money, liquidation preference, drag-along, vesting, convertible note, valuation cap, discount percent), the best time to raise funding is when you feel you are ready. What I mean with this, is that you’ve built your business to a certain stage (e.g. prototype, first customers, e.g. crowdfunding completed) that you feel confident that there is a bright future, and you know what the next steps are. After running the business for 2 years, I finally reached this ‘inner confidence’, and after that, raising funding was a breeze. Not only we successfully raised the funds, but we were also in the position to pick the investors we wanted to accept to the round, and politely passed offers from the rest of the investors. So, self-awareness is important.
Finally, it’s good to add that raising funding does not mean succeeding. And not raising is not failing. So whether you raise or not, most energy should go to building a great product and selling it. External funding is just a tool.
PS. How does an investor meeting look like in real life? As investor meetings happen behind closed doors, there are few examples of how it really works. For first-time founders, this is the best video I’ve encountered to understand how to run an investor meeting. Start to look at the video at the point 20:30. First, there is a sloppy example, and after that, a successful example of a meeting.
6. Who — The A Method For Hiring
Best book on Recruiting
There are loads of books on recruiting, and most of them are full of fluffy rubbish. Believe me, when I started to recruit, I browsed several books on recruiting and most were either too general or had too narrow a perspective.
This was the only really good book I’ve found in the field. It’s research-based, and there is over 1300 hours of interviews with over 300 CEOs on the topic. When you’re about to start recruiting your first employees, you want to pick up this book.
The main thesis of this book is that many entrepreneurs use bad hiring habits (“voodoo hiring”), and that these need to be unlearned, and replaced with actual time-tested methods.
The first part is the job post description. It needs to be based on outcomes of the role, and specific enough.
The second part is pre-screening. You need to pre-screen heck out of your applicants to save valuable time for the actual face-to-face interview, for those who are potential fits. The largest takeaway I took from the book was the pre-screen phone script. It enabled me to identify potential candidates faster than any other method. It’s simply pure gold. If you are short on time, just implement this pre-screen phone method.
The third part is the actual interview. This is where I see most people doing the ‘voodoo hiring’. I’d estimate 90% of the people in charge of hiring, ask the same stereotypical interview question, and simply just swing the whole meeting. The candidates already know to expect the typical questions, and have well-formulated slick answers. In most cases, the interviewer really learns only some polished superficialities of the candidate.
The whole point of interviews is to put applicants off of their scripts in order to identify both problem areas and whether the candidates fit the position. This book includes a process and practical set of questions on how to make this happen. Also, it guides you to probe deeper when candidates give only superficial answers and gives suggestions on how to do that. I’ve been able to extract many times more value in interviews when I started to use the method.
Finally, an important remark for all tech entrepreneurs out there: The methods in this book are best suited for executive positions — operation, sales, and such. This is not the best book for highly technical hires, such as with software developers. Also, the methods might be a bit overkill for entry-level positions.
After you’ve read the book, they provide a free toolkit on their website you can use with the hiring process.
7. Scaling Up — How a Few Companies Make It...and Why the Rest Don't (Rockefeller Habits 2.0)
Author: Verne Harnish
This book is different from all of the other books mentioned before.
This book is a handbook.
Reading it from start to finish at one session is not the way how it is supposed to be consumed. That’s what I did the first time, and thought - meh, nice tips but nothing spectacular. How wrong I was.
Some years later I picked just one chapter and read it with full focus. (Btw, that was the FACe chapter = Function Accountability Chart). And I filled in the worksheet. My mind was blown.
All chapters have a simple worksheet. If you actually utilize these worksheet, fill in the info, take few hours to talk with your co-founder, your mind will blow how effective they are revealing bottlenecks in your business. Utilizing the tools simply takes time and commitment. To get the most out of this book you need 10-20 times the time investment than any of the other books mentioned above.
Scaling Up is not only a book. It is a framework of all best practices gathered throughout all business books (for e.g. in hiring, they refer to “Who” book mentioned before). They also provide Scale Up certified coaches who can help you implement the Scale Up practices into your business. On average, it takes typically takes 2 years to drive in all the practices. That gives you some idea of how much content there is in this book to be digested. I’ve hired and worked with Scale Up coach, and that was just a really useful experience.
If you are just about to found a business, or you are perhaps 1 or 2 years in, this is not the best book to read. Sure, you can browse it around, and pick some nuggets of knowledge. I would say this book becomes extremely useful at the point when you have a team of over 10 people and/or revenues in excess of 1M.
Build a habit of reading, stay patient, and multiply your knowledge
As Farnam Street writes, if you can get 5% wiser and better every year, then you will be about twice as wise as you are now in less than 15 years. (Go ahead, grab your calculators.) In less than 30 years, this return will be 4x.
This is how the non-gifted among us can surpass otherwise more intelligent people.
When it comes to reading, I quantify these numbers in my Goodreads profile. I save all of my read and to-be-read books there, publicly available for all to explore. It’s a useful tool to keep track of both what I have read and what I am planning to read.