Last year, Justin Ernest identified a significant market inefficiency within venture capital: family offices and smaller institutional investors were keen to back rapidly expanding AI firms but struggled to gain access to their coveted cap tables.
Drawing on 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 his extensive network among both investors and founders would enable him to effectively bridge this access gap.
Opting against the lengthy process of establishing a formal venture capital fund, which he estimates can take new managers 12 to 18 months, Ernest instead capitalized on his network to secure direct allocations of stock in prominent, later-stage companies. He subsequently presents these individual investment opportunities to a curated group of approximately 30 smaller institutional investors through Special Purpose Vehicles (SPVs), which function as dedicated, single-deal funds.
In the past year, his firm, Sabertooth VC, has deployed nearly $400 million across 10 companies, notable among them being Anthropic, Anduril, Databricks, PsiQuantum, and SpaceX. The firm structures each investment as a distinct fund, primarily utilizing SPVs where investors acquire shares in the vehicle that directly holds the target company's stock.
Ernest routinely issues checks ranging from $10 million to $275 million, thereby securing substantial equity stakes, and consistently participates in official, company-sanctioned funding rounds.
While Sabertooth is not unique in providing family offices access to equity in individual high-profile, late-stage startups, Ernest's ability to rapidly raise substantial capital stems from his well-established reputation within this often opaque market of small allocations and SPVs targeting family offices.
Benjamin Wagner, CIO for a family office overseeing the wealth of 50 individuals, affirmed, “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.”
Notably, when Wagner sought to invest directly in PsiQuantum, the quantum computing startup most recently valued at $7 billion, the company’s CFO recommended investing via Sabertooth.
“So, the first time I met [Ernest], I knew he was legitimate,” Wagner recounted, adding, “Justin’s access is definitely different from some of these fly-by-night organizations.”
This level of validation holds immense importance. Especially as companies such as Anthropic and Anduril are increasing scrutiny on unauthorized SPVs, investing through Sabertooth offers smaller limited partners significant peace of mind. They are assured that their capital is being entrusted to an investor who has been directly vetted and is respected by the target companies themselves.
Beyond his technical acumen, the Harvard Business School alumnus refined his communication skills, largely overcoming a childhood speech impediment. Ernest attributes his success in securing coveted stock allocations from highly sought-after tech companies during their fundraising rounds to his expansive 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 approach enables him, for example, to typically secure investor capital for a new SPV from family offices within a tight timeframe.
“I have a captive set of LPs,” he stated. “I can usually make four or five or six phone calls, and I know exactly what my LPs will commit.”
Ernest informed TechCrunch that, for the immediate future, he intends to continue expanding his business of raising funds for specific companies on behalf of his committed limited partner base. Nevertheless, his long-term ambition is to eventually launch a traditional venture fund. While a challenging endeavor, he is confident that Sabertooth’s robust returns generated through these individual SPVs will establish a compelling track record, which is paramount for investors considering backing a new fund.
His aspirations appear to be well underway. Sabertooth has already realized a significant return from chipmaker Groq, which was licensed and subsequently "acqui-hired" by Nvidia for an estimated $20 billion late last year. Looking ahead, SpaceX’s highly anticipated IPO this Friday, coupled with Anthropic’s expected public listing later this year, are poised to deliver an even greater windfall for his investors.
While Special Purpose Vehicles may not command the same "street cred" as traditional venture capital funds, Ernest remains steadfast in his conviction that commencing with SPVs and cultivating a strong reputation among family offices was the correct strategic maneuver, rather than immediately launching an emerging venture fund and contending with established competitors.
“I wanted to be in the action,” he stated confidently. “I think this will end up being one of the best vintages of our lifetime.”
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