“Bet on the jockey, not the horse.” That’s a common refrain in the investing world and recently, I’ve come across a couple of stories that highlighted to me the importance of investing in people when you’re assessing investment opportunities.

In a recent episode of Shark Tank, one of the Sharks, Barbara Corcoran, invested $100,000 in the company with no sales. During the episode, co-founders Krissy Pruske and Rachel Lincoln presented the Sharks with a prototype for a children’s car seat cover called Space Traveler. It looked like a mini tent created to separate fighting children in a car. It also has storage pockets for electronics, snacks, or drinks.

In explaining her decision to invest while the other Sharks passed, Corcoran explained she looked beyond the product and invested in the potential of the entrepreneurs.

The Shark Tank episode reminded me of one of the best venture capital success stories of all time. Sequoia Capital was the only venture investor in WhatsApp. WhatsApp’s founders were known to be iconoclastic and were firm in their convictions.

For example, in the early days of the company, they wrote a manifesto against advertising and vowed they would never make money from placing ads in the service and mucking up users’ experience with the app.

In this spirit, the founders made it clear that they would only work with a single VC firm. The firm they chose was Sequoia Capital because Sequoia was drawn to WhatsApp’s founders’ convictions. Sequoia saw their $60 million investment turn into $3 billion when WhatsApp was acquired by Facebook – a 50x return.

Smart investors do not invest in trendy or speculative investments. 

They are masters at hedging their bets to get the best bang for their investment buck. They leave little to chance. That’s why they avoid speculation like with stocks, crypto, or the latest flavor of the day. There are too many variables left to chance – the financial press, social media, economic indicators, corporate earnings, etc.

They’re too smart to entrust the fate of their investments in the hands of a rabid investing public that can sink a portfolio at the first hint of panic – triggering a crash.

One of their biggest hedging strategies of the ultra-wealthy is to invest in the right people. For background, many ultra-wealthy investors made their money from starting a business or from a specific industry segment.

They are experts in their respective fields and have made millions from their efforts. They’ve always taken a methodical, sensible, and practical approach to their business and their risk-taking was always measured and thought out.

More than likely, the biggest risk most of these investors ever made was when they started the business. That’s why they don’t speculate. It goes against their principles. They’re not going to put their hard-earned money into something unproven and highly speculative like crypto that could sink all their hard work in an instant.

With an eye on growing their wealth, smart investors look outside their areas of expertise to diversify their holdings and expand their passive streams of income.

Unfortunately, it would take too much time and effort to become an expert in multiple industries, asset classes, geographic locations, etc. and to become knowledgeable with all the market dynamics, economic fundamentals, demographics, etc. associated with those industries and asset classes. That’s why they seek out others like themselves – experts in their respective fields.

By leveraging the expertise of others by partnering with them, smart investors – by proxy – are investing in an asset with expertise and confidence because of the people backing these ventures.

They are investing alongside these experts without putting in all the time, capital, and efforts needed if they were to do it on their own. I can’t underscore enough of the importance smart investors put in relying on experts for hedging their bets on an investment.

Here’s what smart investors would be looking for in potential partners. I’m going to focus these attributes on real estate investments.

• Competency. Whether through education or practical training, do the founders possess the required competency to oversee the various aspects of a real estate venture from both the real estate and capital raising sides?
• Experience. Do the founders have experience with real estate? Do they have experience with real estate investing? You don’t want to be investing in somebody else’s
• Expertise. Do the founders possess the expertise in the specific asset segment, geographic location, and target market for which they are soliciting capital to invest in? Do they know the ins and outs of every aspect of this type of investment just like the smart investor was an expert in their primary business?
• Resources. Do the founders have the infrastructure, staff, personnel, technological, resources, etc. to execute their business plan?
• Time. Smart investors want to make sure this is not a part-time venture for the founders. They want to make sure the venture receives adequate time and devotion from the founders for making the business a success.
• Track Record. What were the results of the founders’ past ventures? Smart investors will demand to see financials to verify the founders’ track records.
• Connections. How connected are the founders of their target geographic locations? This is important because well-connected founders have logistic advantages such as access to contractors, real estate agents, marketers, etc. that can translate to cost savings and profits for the venture.

In the investing world, some of the most affluent and successful investors recognize the value of leveraging the expertise of others. It’s a hedging strategy.

That’s why investors avoid Wall Street where they’re unable to screen management to align their investment objectives with the company. 

If you wonder why many affluent investors leverage the expertise of others by teaming up with investing partners – it’s simple.

While they focus on their own business endeavors and ventures within their wheelhouse of expertise, experience, and passion, they let their investment partners operate within their own wheelhouse of expertise, experience, and passions in order to maximize returns.