Justin Ernest identified a significant void in the venture capital landscape last year: while family offices and smaller institutional investors were keen to back the most rapidly expanding AI companies, they frequently lacked access to their cap tables.
Leveraging over five years of experience at Playground Global, where he focused on deep tech investments and played a key role in fundraising, Ernest was convinced that his extensive network among both investors and founders positioned him perfectly to bridge this access gap.
Instead of embarking on the lengthy process of launching a formal VC fund—a venture he estimates takes new managers 12 to 18 months—Ernest strategically utilized his connections to secure allocations of stock in highly sought-after, later-stage companies. He then presented these individual investment opportunities to a curated group of approximately 30 smaller institutional investors, facilitated through special purpose vehicles (SPVs) that function as single-deal funds.
Over the past year, Ernest’s firm, Sabertooth Capital, has successfully deployed nearly $500 million across 10 companies, including prominent names such as Anthropic, Anduril, Base Power, Databricks, PsiQuantum, and SpaceX. Each transaction is treated as a distinct fund, typically structured as an SPV where investors acquire shares in the vehicle that holds the underlying company stock.
His firm issues substantial checks, ranging from $10 million to $275 million, thereby securing significant equity stakes. Crucially, Sabertooth Capital consistently participates in official, company-approved funding rounds, ensuring legitimacy and direct engagement.
While Sabertooth is not the sole entity providing family offices with opportunities to invest in individual high-profile, late-stage startups, Ernest's ability to swiftly raise substantial capital stems from his impeccable reputation within the often opaque realm of small allocations and SPVs targeting family offices.
Benjamin Wagner, CIO of a family office overseeing the wealth of 50 individuals, attested to Ernest's authenticity, stating, “Justin is authentically an investor. He has judgment, he has expertise, he’s very technical, that really distinguishes him from other organizations that tend to, in my opinion, just trying to aggregate capital.”
Wagner experienced this firsthand when attempting to invest directly in PsiQuantum, the quantum computing startup recently valued at $7 billion. The company’s CFO personally recommended investing through Sabertooth.
“So, the first time I met [Ernest], I knew he was legitimate,” Wagner recalled. “Justin’s access is definitely different from some of these fly-by-night organizations.”
Such validation holds immense importance. At a time when leading startups like Anthropic and Anduril are rigorously cracking down on unauthorized SPVs, investing through Sabertooth offers smaller limited partners a crucial sense of security. They are assured that their capital is being entrusted to an investor who is directly vetted and respected by the target companies themselves.
Beyond his technical acumen, the Harvard Business School alumnus refined his communication skills, having largely overcome a childhood speech impediment. Ernest attributes his success in securing highly coveted stock allocations during company fundraising rounds to his expansive and robust network.
“I’ve always found that my sort of superpower is being the nucleus of my network, and I like to use that and utilize that in a very strategic way,” he shared with TechCrunch.
This strategic leveraging of his network enables him, for instance, to typically secure investor capital for new SPVs from family offices within a remarkably tight timeframe.
“I have a captive set of LPs,” he noted. “I can usually make four or five or six phone calls, and I know exactly what my LPs will commit.”
Ernest conveyed to TechCrunch that his immediate focus is on expanding his current business model of raising funds for specific companies on behalf of his dedicated LP base. However, his ultimate ambition is to eventually establish a traditional venture fund. Acknowledging the difficulty of this undertaking, he believes that Sabertooth’s robust returns generated through these one-off SPVs will serve as compelling proof of his track record, a paramount factor for investors considering backing a new fund.
He is already making significant strides toward that aspiration. Sabertooth has realized a major return from chipmaker Groq, which was licensed and acqui-hired by Nvidia for $20 billion late last year. Anticipated future successes include SpaceX’s highly awaited IPO this Friday, along with Anthropic’s expected public listing later this year, both poised to deliver substantial windfalls for his investors.
Despite the fact that SPVs may not carry the same institutional prestige as traditional VC funds, Ernest remains confident that his strategic decision to begin with them, and cultivate a strong reputation with family offices, was the correct path. He believes this approach, rather than immediately launching an emerging venture fund amidst intense competition, has positioned him advantageously. “I wanted to be in the action,” he stated. “I think this will end up being one of the best vintages of our lifetime.”
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