Last year, Justin Ernest noticed a huge gap in how venture capital works: family offices and smaller institutional investors were willing to invest in the fastest-growing AI companies, but they couldn’t access those cap tables.
Having spent over five years at Playground Global investing in deep technology and helping lead fundraising, Ernest was confident that his connections with both investors and founders would allow him to bridge this gap.
Instead of launching a formal VC fund, a process he says takes new managers 12 to 18 months, Ernest used his network to secure equity allocations in high-profile, later-stage companies. It then offers these individual deals to a pool of around 30 smaller institutional investors using special purpose vehicles (SPVs), single asset funds and nominee structures. In the latter, his company, Sabertooth Capitalholds shares on behalf of participating investors rather than through a traditional SPV.
In the past 12 months, Sabertooth has invested nearly $500 million in 10 companies, including Anthropic, Anduril, Base Power, Databricks, PsiQuantum and SpaceX. The company treats each deal as its own separate fund, in most cases structuring it as an SPV, in which the fund’s investors buy shares in the vehicle that owns the stock.
He writes checks ranging from $10 million to $275 million — meaning he earns significant chunks of equity — and always participates in formal, company-sanctioned funding rounds.
Sabertooth isn’t the only company offering family offices the chance to buy shares in individual high-profile startups. However, Ernest has quickly amassed a significant amount of cash from them because, in the sometimes shady world of small grants and SPVs targeting family offices, he has built a strong reputation.
“Justin is a true investor,” said Benjamin Wagner, CIO for a family office that manages the wealth of 50 people. “He’s got judgment, he’s got expertise, he’s very technical, which really sets him apart from other organizations that tend, in my opinion, to just try to raise capital.”
When Wagner tried to invest directly in PsiQuantum, the quantum computing startup last valued at $7 billion, the company’s CFO suggested he invest through Sabertooth.
“Well, the first time I met [Ernest]I knew he was legit,” Wagner said. “Justin’s access is definitely different than some of these fly-by-night organizations.”
This validation is extremely important. At a time when startups like Anthropic and Anduril are cracking down on unauthorized SPVs, investing through Sabertooth offers smaller limited partners some peace of mind. They know they are entrusting their money to an investor who is directly vetted and respected by the companies themselves.
Beyond technical knowledge, the Harvard Business School graduate honed his communication skills after largely overcoming a childhood speech impediment. Earnest credits his ability to secure equity allocations when coveted tech companies grow to his broad network.
“I’ve always found that my kind of superpower is the core of my network, and I like to use it and use it very strategically,” he told TechCrunch.
For example, it can generally obtain investment capital for a new SPV from family offices on a tight schedule.
“I have a captive set of LPs,” he said. “Usually I can make four or five or six phone calls and know exactly what my LPs are going to commit to.”
Ernest told TechCrunch that for now, he wants to continue growing his business by raising capital for specific companies on behalf of his dedicated LP base. However, his ultimate goal is to eventually raise a traditional venture fund. That’s a tall order, but he believes Sabertooth’s strong returns through these individual SPVs to prove its track record, something investors care most about when deciding to back a new fund.
He is on his way with this wish. Sabertooth already had a major comeback from chipmaker Groq, which was licensed and acquired by Nvidia for $20 billion late last year. Next up is SpaceX’s highly anticipated IPO this Friday, along with Anthropic’s expected public listing later this year. They are poised to deliver an even bigger windfall for its investors.
But SPVs don’t have the same kind of street cred as traditional VC funds. However, Ernest remains convinced that starting with them and gaining a solid rep with the family offices, rather than starting a pop-up fund and duking it out with competitors was the right strategic move. “I wanted to be in the action,” he said. “I think this will end up being one of the best vintages of our lifetime.”
Updated to reflect Sabertooth’s total capital.
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