Final 12 months, Justin Ernest seen an enormous hole in how enterprise capital was working: Household places of work and smaller institutional buyers have been desperate to spend money on the fastest-growing AI firms however couldn’t get entry to these cap tables.
Having spent over 5 years at Playground International investing in deep tech and serving to lead fundraising, Ernest was assured his connections to each buyers and founders would permit him to bridge that hole.
As a substitute of launching a proper VC fund, a course of he says takes new managers wherever from 12 to 18 months, Ernest used his community to safe allocations of inventory in high-profile, later-stage firms. He then provides these particular person offers to a gaggle of about 30 smaller institutional buyers utilizing particular goal autos (SPVs), which act as single-deal funds.
During the last 12 months, his agency, Sabertooth Capital, has invested practically $500 million into 10 firms, together with Anthropic, Anduril, Base Energy, Databricks, PsiQuantum, and SpaceX. The agency treats every deal as its personal separate fund, typically structuring it as an SPV, by which the fund’s buyers purchase shares within the car that owns the inventory.
He’s writing checks starting from $10 million to $275 million — that means he’s gaining important chunks of shares — and all the time collaborating in official, company-approved funding rounds.
Sabertooth isn’t the one agency providing household places of work a possibility to buy fairness in particular person high-profile, late-stage startups. Nevertheless, Ernest rapidly raised a big amount of money from them as a result of, within the sometimes-shady world of small allocations and SPVs focusing on household places of work, he’s earned a strong fame.
“Justin is authentically an investor,” mentioned Benjamin Wagner, a CIO for a household workplace managing the wealth of fifty people. “He has judgment, he has experience, he’s very technical, that basically distinguishes him from different organizations that are inclined to, in my view, simply attempting to mixture capital.”
When Wagner tried to take a position straight in PsiQuantum, the quantum computing startup final valued at $7 billion, the corporate’s CFO prompt that he make investments via Sabertooth.
“So, the primary time I met [Ernest], I knew he was respectable,” Wagner mentioned. “Justin’s entry is unquestionably totally different from a few of these fly-by-night organizations.”
That validation is extraordinarily necessary. At a time when startups like Anthropic and Anduril are cracking down on unauthorized SPVs, investing via Sabertooth provides smaller restricted companions some peace of thoughts. They know they’re entrusting their cash to an investor who’s straight vetted and revered by the businesses themselves.
Past technical information, the Harvard Enterprise Faculty graduate honed his communication expertise after largely overcoming a childhood speech obstacle. Ernest credit his capability to safe allocations of inventory when extremely coveted tech firms are elevating to his vast community.
“I’ve all the time discovered that my form of superpower is being the nucleus of my community, and I like to make use of that and make the most of that in a really strategic approach,” he advised TechCrunch.
For example, he can typically acquire investor capital for a brand new SPV from household places of work on a decent timeline.
“I’ve a captive set of LPs,” he mentioned. “I can often make 4 or 5 or 6 cellphone calls, and I do know precisely what my LPs will commit.”
Ernest advised TechCrunch that for now, he desires to proceed rising his enterprise of elevating funds for particular firms on behalf of his devoted LP base. Nevertheless, his final purpose is to finally elevate a conventional enterprise fund. That’s a tough job, however he believes Sabertooth’s robust returns through these one-off SPVs to show his monitor report, one thing buyers care about most when deciding to again a brand new fund.
He’s on his approach with that want. Sabertooth has already had one main huge return from chipmaker Groq, which was licensed and acqui-hired by Nvidia for $20 billion late final 12 months. Subsequent up is SpaceX’s extremely anticipated IPO this Friday, together with Anthropic’s anticipated public itemizing later this 12 months. They’re poised to ship a fair better windfall for his buyers.
However SPVs don’t have the identical form of road cred as conventional VC funds. But Ernest stays assured that beginning with them, and incomes a strong rep with household places of work, quite than launching an rising enterprise fund and duking it out with rivals was the fitting strategic transfer. “I needed to be within the motion,” he mentioned. “I believe it will find yourself being among the best vintages of our lifetime.”
Up to date to mirror Sabertooth’s complete capital deployed.
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