In the evolving landscape of venture capital, Justin Ernest has identified and seized a compelling opportunity. Last year, he recognized a significant disconnect between family offices, smaller institutional investors, and access to lucrative cap tables of rapidly growing AI companies. With a background of over five years at Playground Global, where he specialized in deep tech investments, Ernest felt well-equipped to bridge this gap.
Rather than opting to launch a conventional VC fund—a process that often takes new managers between 12 to 18 months—Ernest leveraged his extensive network to accumulate equity stakes in high-profile, later-stage companies. Through his firm, Sabertooth Capital, he has devised a unique approach to offer these deals to a select group of about 30 smaller institutional investors. This includes a mix of special purpose vehicles (SPVs), single-asset funds, and nominee structures, where his firm holds shares on behalf of the participating investors, distinguishing itself from traditional SPVs.
In the past year alone, Sabertooth has deployed nearly $500 million into ten companies, among them well-known names like Anthropic, Anduril, Base Power, Databricks, PsiQuantum, and SpaceX. Each investment is treated as a separate fund, with a majority structured as SPVs. Ernest’s investment amounts range from $10 million to $275 million, allowing him to secure substantial equity while participating officially in company-approved funding rounds.
Sabertooth is not the only player in this niche; however, Ernest has quickly gained traction with family offices eager for access to high-profile, late-stage startups. His reputation, built on integrity and expertise, stands out in a market that often grapples with questionable allocation practices. “Justin is authentically an investor,” remarked Benjamin Wagner, a CIO for a family office overseeing the wealth of around 50 individuals. Wagner noted that Ernest’s judgment and technical capabilities set him apart, especially compared to other firms that focus solely on capital aggregation.
An example of Ernest’s credibility came when Wagner attempted to invest directly in PsiQuantum, a quantum computing startup valued at $7 billion. Upon suggestion from the company’s CFO to invest through Sabertooth, Wagner quickly recognized Ernest’s legitimacy. This kind of validation is crucial, especially as companies like Anthropic and Anduril tighten controls on unauthorized SPVs. By investing through Sabertooth, smaller limited partners can rest assured their funds are in capable hands.
Ernest has also harnessed his communication skills, honing them in part due to a childhood speech impediment. He describes his ability to connect with investors as a “superpower,” allowing him to swiftly funnel capital into new SPVs from family offices. “I have a captive set of LPs,” he explained, illustrating how a handful of calls is often sufficient to confirm commitments from his investors.
For now, Ernest remains focused on expanding Sabertooth’s portfolio by raising funds for targeted companies through dedicated limited partner partnerships. However, his long-term ambition is to establish a traditional venture fund. Acknowledging the challenges ahead, he believes that Sabertooth’s favorable returns from these SPVs will help build the track record needed to attract investors for a future fund.
Indeed, Sabertooth has already celebrated significant successes, such as their notable return from chipmaker Groq, which was acquired by Nvidia for a staggering $20 billion late last year. With high-profile IPOs on the horizon—such as SpaceX’s anticipated listing and Anthropic’s expected move later this year—Sabertooth’s investors may soon find themselves rewarded with even greater returns.
Despite SPVs lacking the same recognition as traditional VC funds, Ernest remains confident in his strategic decision to commence with this model. “I wanted to be in the action,” he asserted. He believes that this approach could ultimately position him and his firm advantageously within a market offering one of the most promising investment vintages in recent history.
