Last year, Justin Ernest identified a significant disparity in the functioning of venture capital: Family offices and smaller institutional investors were keen to invest in the most rapidly growing AI firms but lacked access to relevant cap tables. 

With over five years at Playground Global, focusing on deep tech investment and aiding in fundraising, Ernest felt assured that his connections with both investors and founders would enable him to close that gap.

Instead of embarking on a traditional VC fund, which he claims takes new managers between 12 to 18 months, Ernest leveraged his network to obtain allocations of stock in prominent, later-stage companies. He then presents these individual opportunities to a consortium of around 30 smaller institutional investors via special purpose vehicles (SPVs), single-asset funds, and nominee structures. In the latter model, his firm, Sabertooth Capital, holds shares on behalf of participating investors rather than through a conventional SPV.

In the past year, Sabertooth has invested nearly $500 million across 10 companies, such as Anthropic, Anduril, Base Power, Databricks, PsiQuantum, and SpaceX. The firm approaches each deal as a distinct fund, typically structuring it as an SPV, enabling the fund’s investors to acquire shares in the entity that holds the stock.

He’s issuing checks ranging from $10 million to $275 million — acquiring substantial portions of shares — and consistently takes part in officially sanctioned, company-approved funding rounds.

Sabertooth isn’t the sole firm providing family offices the chance to acquire equity in individual high-profile, late-stage startups. Nonetheless, Ernest swiftly attracted considerable investment from them due to his solid reputation in the sometimes murky realm of small allocations and SPVs aimed at family offices.

“Justin is genuinely an investor,” remarked Benjamin Wagner, a CIO for a family office overseeing the wealth of 50 individuals. “He possesses judgement, expertise, and a high level of technical knowledge, which truly sets him apart from other organizations that seem to, in my view, just try to gather capital.”

When Wagner sought to invest directly in PsiQuantum, the quantum computing startup last valued at $7 billion, the company’s CFO recommended that he invest via Sabertooth.

“So, from the first time I met [Ernest], I recognized his authenticity,” Wagner stated. “Justin’s access is certainly distinct from some of these transient organizations.”

That endorsement is highly significant. During a period when startups like Anthropic and Anduril are cracking down on unauthorized SPVs, investing through Sabertooth provides smaller limited partners with a sense of security. They trust their funds to an investor who is directly vetted and respected by the companies themselves.

Beyond his technical acumen, the Harvard Business School graduate refined his communication skills after largely overcoming a childhood speech impediment. Ernest attributes his ability to secure stock allocations when highly sought-after tech firms raise funds to his extensive network.

“I’ve always considered my sort of superpower is being the nucleus of my network, and I enjoy using that strategically,” he shared with TechCrunch.

For example, he can typically garner investor capital for a new SPV from family offices within a tight timeframe.

“I have a devoted set of LPs,” he remarked. “I can usually make four, five, or six phone calls and know exactly what my LPs will commit.”

Ernest conveyed to TechCrunch that currently, he aims to continue expanding his business of raising funds for specific companies on behalf of his dedicated LP base. However, his ultimate aspiration is to ultimately establish a traditional venture fund. This is a challenging endeavor, but he believes Sabertooth’s strong returns through these one-off SPVs will demonstrate his track record, which is a critical factor for investors when deciding to support a new fund.

He’s making progress towards that goal. Sabertooth has already achieved a significant return from chipmaker Groq, which was licensed and acqui-hired by Nvidia for $20 billion late last year. Next on the horizon is SpaceX’s much-anticipated IPO this Friday, along with Anthropic’s expected public listing later this year. These are set to generate an even larger windfall for his investors.

However, SPVs lack the same level of credibility as traditional VC funds. Yet Ernest remains optimistic that starting with them, and building a strong reputation with family offices, rather than launching an emerging venture fund and competing head-to-head with rivals was the right strategic choice. “I wanted to be actively involved,” he stated. “I believe this will turn out to be one of the best vintages of our lifetime.”

Updated to reflect Sabertooth’s total capital deployed.