The cofounders of Instagram break down what they look for in an investment - and explain how Ray Dalio has been an 'enormous influence'

• Kevin Systrom and Mike Krieger, cofounders of Instagram, base their investment strategies around being able to spot companies that can solve unique problems efficiently and effectively.
• Their approach, which also looks for strong managerial teams and competitive advantages, shares common threads with Warren Buffett's own investment strategy.
• Systrom also says that Ray Dalio's "very special" principled approach to work and life is something that resonated with him.
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It's safe to say that Kevin Systrom and Mike Krieger, the cofounders of Instagram, know a bit about allocating resources and identifying investment opportunities.

After all, their photo-sharing app has one of the largest user bases and fetched a billion-dollar price tag in 2012, when Facebook bought the company.

Systrom and Krieger think about investing a little bit differently than most - a notion that was made clear in a recent appearance on the podcast "Invest Like The Best".

"The world of investing is giving ideas the chance to take flight, hoping that they work, and basically just having different levels of risk," Systrom said. "As an investor myself, what I look for are: great companies that understand their customer in and out and are solving a really unique problem that no one else has quite figured out how to solve."

He added: "And those companies tend to do very, very well."

Systrom's investing style sounds reminiscent of Warren Buffett but with a Silicon Valley twist. It's innovative and somewhat philosophical, yet grounded in tried-and-true old-school investing tactics. It's the perfect balance of old and new.

For decades, Buffett has been touting an approach to investing that includes buying companies with wide, unique "moats." This notion provides his investments with an extra margin of safety from would-be competitors, and ensures that a competitive advantage isn't easily replicable. It's Buffett's bread and butter - and something that Systrom seems to be rather fond of.

Krieger chimed in to build on Systrom's statement:

"If there is any amount of edge or unique view we have on the world I think it's: What problems are solved, how well the product is solving those problems, and what team is going out and solving those problems,"

He continued: "I have to believe that is an interesting view on the world and will lead to some ability to spot things."

Krieger also mentions that a company's team is just as important as the business itself. He believes that great leaders and teams have the ability to completely transform a business. And he says it's an idea that shouldn't be overlooked when vetting a company for potential investment.

It's also important to note that neither Systrom nor Krieger mention profits, addressable markets, or financial projections in their statements. This notion speaks volumes about what they believe is truly important for the longevity of an investment: a company's ability to problem-solve.

Lessons from Dalio

Along their journey, Systrom and Krieger were influenced by some iconic individuals - and the ideas and thoughts that were shared wound up sticking.

"For me, I went outside of venture startups and I said: 'Who just thinks the way I like to think?'," Systrom said. "And I got introduced to Ray Dalio."

For the uninitiated, Ray Dalio is the billionaire cochief investment officer and founder of Bridgewater Associates.

He's synonymous with a radically transparent and truthful approach to business and management. Over time, he's developed a set of principles that he and his firm strictly adhere to. Dalio largely credits the success of Bridgewater and his billionaire status to this type of strategy.

Systrom seems to have taken a liking to Dalio's mantras.

"Having a very specific view and holding onto it I thought was something that was really special - regardless of whether you're right," Systrom said. "I think I learned a lot from him to think a little bit more principled about what we were doing."

"He was an enormous influence on me - still is," he concluded.