Business magnate Warren Buffett is widely regarded as one of the greatest investors of the modern-day world. His seemingly unmatched and consistent value-investing strategies have earned him the title of Oracle of Omaha.

Many of his investing strategies are known, but there is one that is often overlooked yet incredibly important. It’s a lot more prevalent in the startup investing world — one customer can mean all the difference for a startup but not necessarily for public companies.

What happened: Buffett is one of the best investors in the world, so there are many lessons to be learned. He loves Coke and decided long ago to invest in the Coca-Cola Co. That ended up being one of his best investments ever. Now, he is acquiring Apple Inc. stock and recently switched from a flip phone to an iPhone. 

So what strategy is this, and how does that relate to Buffett’s love for Coca-Cola? It’s called value-added investing, and the general idea behind it is that you should be investing in startups you use, are a customer of and can provide additional value to the company.

For Buffett, one of his longest-held positions is Coca-Cola, which he has owned for over 34 years. He publicly supports the company and is said to drink as much as five cans of Coke a day.

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Buffett’s' firm Berkshire Hathaway Inc. began buying shares of Apple in 2016 and is now the company’s second-largest shareholder, owning over 5% of the tech giant. Later in 2020, Buffett ditched his $20 flip phone for an iPhone and now also has an iPad. The idea likely wasn’t the need for a new phone but rather a statement to support Berkshire Hathaway’s largest investment.

This idea can be an effective method of investing. In the public markets, investing in companies you use likely is more effective because if you like the company, the odds are that others will, too. But your individual purchase won’t move the needle more than likely. 

In startups, that certainly is not the case. Startups often rely on funding like venture capital (VC) to keep the company going until it can be profitable. The first customers can be expensive because the brand isn’t established, and people will be more hesitant to spend their money. But if you become a buyer and unofficial brand ambassador of a startup you like, that can mean all the difference. 

While some people can apply this to startups that sell to other businesses, most investors will be looking toward consumer-focused companies like Apple and Coke. 

With all of these investments, it’s important to note they are speculative and illiquid so don’t invest more than you can afford to lose. Still, startup investing can be a great way to diversify a portfolio or simply invest in a company you like.

 See more on startup investing from Benzinga.

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