Last year, Justin Ernest identified a significant gap in venture capital access for smaller institutional investors. Family offices and smaller funds were eager to invest in fast-growing AI companies but lacked access to cap tables. Instead of launching a formal VC fund, which typically takes 12 to 18 months, Ernest used his network to secure stock allocations in high-profile, later-stage companies. He then offered these individual deals to about 30 smaller institutional investors through special purpose vehicles (SPVs), which act as single-deal funds. Over the past year, his firm, Sabertooth Capital, has invested nearly $500 million into 10 companies, including Anthropic, Anduril, Base Power, Databricks, PsiQuantum, and SpaceX. The firm treats each deal as a separate fund, often structuring it as an SPV, in which investors buy shares in the vehicle that owns the stock. He’s writing checks ranging from $10 million to $275 million, securing significant shares and always participating in official, company-approved funding rounds.
Sabertooth is not the only firm offering family offices an opportunity to purchase equity in individual high-profile, late-stage startups. However, Ernest quickly raised a significant amount of cash from them because, in the sometimes-shady world of small allocations and SPVs targeting family offices, he’s earned a solid reputation. “Justin is authentically an investor,” said Benjamin Wagner, a CIO for a family office managing the wealth of 50 individuals. “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.” When Wagner tried to invest directly in PsiQuantum, the quantum computing startup last valued at $7 billion, the company’s CFO suggested that he invest through Sabertooth. “So, the first time I met [Ernest], I knew he was legitimate,” Wagner said. “Justin’s access is definitely different from some of these fly-by-night organizations.” That validation is extremely important. At a time when startups like Anthropic and Anduril are cracking down on unauthorized SPVs, investing through Sabertooth gives 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.
Ernest, a Harvard Business School graduate, honed his communication skills after largely overcoming a childhood speech impediment. He credits his ability to secure allocations of stock when highly coveted tech companies are raising to his wide 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 told TechCrunch. For instance, he can generally obtain investor capital for a new SPV from family offices on a tight timeline. “I have a captive set of LPs,” he said. “I can usually make four or five or six phone calls, and I know exactly what my LPs will commit.” Ernest told TechCrunch that for now, he wants to continue growing his business of raising funds 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 difficult task, but he believes Sabertooth’s strong returns via these one-off SPVs to prove his track record, something investors care about most when deciding to back a new fund. He’s on his way with that wish. Sabertooth has already had one major big return from chipmaker Groq, which was licensed and acqui-hired 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 greater windfall for his investors.
Source: techcrunch
