Warren Buffett, start-up investor? Of course not. But the Oracle of Omaha still exerts influence over the entrepreneurial realm in some unexpected ways, both on paper and in spirit.
Buffett, the CEO of Berkshire Hathaway (BRK.A) (BRK.B) , "has never allocated capital to a start-up and wouldn't, because he's way too conservative," said Lawrence Cunningham, corporate law professor at George Washington University and author of Berkshire After Buffett. "On the other hand, the operating companies are allowed to do whatever they want pretty much."
Those companies include a variety of household names, from fast-food chain Dairy Queen to auto-insurer Geico and Burlington Northern railroad. And some of them, like furniture business CORT, are dipping their toes into the start-up realm. So are companies in which Buffett has simply amassed a stake, rather than making an acquisition outright.
Berkshire investment Munich Re, an international reinsurance group headquartered in Germany, is backing a start-up accelerator, for example. Its Spanish division has partnered with Madrid and London-based venture capital firm Mundi Ventures to put together MundiLab, a year-long program meant to boost digital companies in the insurance and reinsurance industries.
"Munich Re wants to position themselves as an innovation leader," said Leire Mancisidor, investment director at Mundi Ventures. "This is sort of a tool that they use to enable not only themselves but also their major leaders and major customers to come full speed when it comes to disruption, innovation in business and industry and trying to adopt new processes, and integrate with start-ups doing new things."
Some of that interest may be driven by challenges in the reinsurance business, where increasing competition has curbed profitability, a trend Buffett himself has pointed out.
"One element of our strategy is based on our ability to innovate, particularly in these times of extreme competition in the traditional reinsurance business," Munich Re chairman Nikolaus von Bomhard said at the company's annual meeting. "Innovations enable us to keep pushing back the boundaries of insurability and to tap into new markets."
Munich Re isn't the only of Buffett's picks catering to the start-up crowd.
CORT, a furniture rental company Berkshire bought in 2000, said many of its clients are budding companies. Part of Berkshire's financial products division, CORT brought in $36 million in earnings in 2014.
"We do a lot of business with start-ups as they are starting to start their business and often times, when they're just starting out, they're not sure that they want to invest their capital in office furnishings, especially if they're not sure what the end game is going to look like," said Paula Newell, vice president of strategic business development at CORT.