For makers and artists navigating the booming AI landscape, the story of Justin Ernest offers a crucial lesson in access. While many creators watch from the sidelines, savvy family offices and smaller institutions are bypassing the traditional bottlenecks of venture capital. Instead of waiting for a formal fund to launch, they are securing direct equity stakes in the very companies shaping the future of technology.
Bypassing the traditional fund structure
Ernest identified a significant disconnect last year. While family offices and smaller institutional investors were eager to back the fastest-growing AI firms, they lacked entry to the necessary cap tables. Drawing on over five years spent at Playground Global, where he invested in deep tech and led fundraising efforts, Ernest was confident his dual connections to both founders and investors could bridge this divide.
He avoided the standard route of launching a formal VC fund, a process he notes typically takes new managers between 12 and 18 months. Instead, he leveraged his network to secure allocations of stock in high-profile, later-stage companies. These individual deals are then offered to a cohort of roughly 30 smaller institutional investors via Special Purpose Vehicles, or SPVs, which function as single-deal funds.
A massive portfolio without a traditional fund
In the last 12 months, his firm, Sabertooth VC, has deployed nearly $400 million across 10 companies. This roster includes heavyweights such as Anthropic, Anduril, Databricks, PsiQuantum, and SpaceX. The firm structures each deal as its own separate fund, typically as an SPV where investors purchase shares in the vehicle that owns the underlying stock.
Ernest is writing checks ranging from $10 million to $275 million, meaning he is acquiring significant chunks of equity. Crucially, he always participates in official, company-approved funding rounds, ensuring legitimacy in a market often rife with unauthorised intermediaries.
The power of reputation
Sabertooth is not the only entity offering family offices a chance to buy equity in individual, late-stage startups. However, Ernest has raised substantial cash from them quickly. In a sector that can sometimes be opaque, he has cultivated a solid reputation among family offices.
“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.”
Wagner attempted to invest directly in PsiQuantum, the quantum computing startup last valued at $7 billion. The company’s CFO suggested he invest through Sabertooth instead.
“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.”
This validation is vital. As startups like Anthropic and Anduril crack down on unauthorised SPVs, investing through Sabertooth provides smaller limited partners with peace of mind. They know their money is entrusted to an investor directly vetted and respected by the companies themselves.
From speech impediment to network nucleus
Beyond his technical acumen, the Harvard Business School graduate honed his communication skills after largely overcoming a childhood speech impediment. Ernest attributes his ability to secure coveted stock allocations to his extensive 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.
This allows him to 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.”
Looking toward public markets
Ernest told TechCrunch that for now, he intends to continue growing his business of raising funds for specific companies on behalf of his dedicated LP base. His ultimate goal remains raising a traditional venture fund. He believes Sabertooth’s strong returns via these one-off SPVs will prove his track record, a factor investors care about most when backing a new fund.
He is on the way to that objective. Sabertooth has already secured one major 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.
However, SPVs do not carry the same street cred as traditional VC funds. Yet Ernest remains confident that starting with them, and earning a solid reputation with family offices, rather than launching an emerging venture fund and competing immediately, 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.”
Key takeaways
- Justin Ernest’s firm, Sabertooth VC, has invested nearly $400 million in 10 companies over 12 months using SPVs rather than a traditional fund structure.
- Family offices are increasingly trusting Ernest due to his direct access to companies and his technical expertise, distinguishing him from capital aggregators.
- Ernest plans to eventually launch a traditional VC fund, using the strong returns from current SPV deals to build the necessary track record.
- Upcoming public listings for SpaceX and Anthropic, alongside the Nvidia acquisition of Groq, are expected to generate significant returns for Sabertooth’s investors.
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