How Justin Ernest invested nearly $500M into hot startups without a traditional VC fund
Justin Ernest, founder of the firm Sabertooth, invested nearly $500 million into 10 late-stage startups over 12 months without raising a traditional venture fund. He instead used special purpose vehicles and a captive group of about 30 institutional investors, mostly family offices, to buy stakes in companies such as Anthropic, SpaceX, Databricks, PsiQuantum, and Base Power. Checks ran from $10 million to $275 million per deal, and the firm has already booked one exit through Groq's $20 billion sale to Nvidia.
Key Takeaways
- Instead of spending a year raising a formal venture fund, the Sabertooth VC founder used a captive network of LPs to invest in startups like Anthropic, Anduril, and SpaceX.
Last year, Justin Ernest noticed a massive gap in how venture capital was working: Family offices and smaller institutional investors were eager to invest in the fastest-growing AI companies but couldn't get access to those cap tables.
- Over the last 12 months, Sabertooth has invested nearly $500 million into 10 companies, including Anthropic, Base Power, Databricks, PsiQuantum, and SpaceX, according to Ernest.
The firm treats each deal as its own separate fund, in most cases structuring it as an SPV, in which the fund's investors buy shares in the vehicle that owns the stock.
- 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.
- Beyond technical knowledge, the Harvard Business School graduate honed his communication skills after largely overcoming a childhood speech impediment.
Ernest credits his ability to secure allocations of stock when highly coveted tech companies are raising to his wide network.
- However, his ultimate goal is to eventually raise a traditional venture fund.
Stats & Key Facts
- #Justin Ernest, founder of the firm Sabertooth, invested nearly $500 million into 10 late-stage startups over 12 months without raising a traditional venture fund.
- #He instead used special purpose vehicles and a captive group of about 30 institutional investors, mostly family offices, to buy stakes in companies such as Anthropic, SpaceX, Databricks, PsiQuantum, and Base Power.
- #Checks ran from $10 million to $275 million per deal, and the firm has already booked one exit through Groq's $20 billion sale to Nvidia.
- #Instead of launching a formal VC fund, a process he says takes new managers anywhere from 12 to 18 months, Ernest used his network to secure allocations of stock in high-profile, later-stage companies.
Instead of spending a year raising a formal venture fund, the Sabertooth VC founder used a captive network of LPs to invest in startups like Anthropic, Anduril, and SpaceX. Last year, Justin Ernest noticed a massive gap in how venture capital was working: Family offices and smaller institutional investors were eager to invest in the fastest-growing AI companies but couldn't get access to those cap tables. Having spent over five years at Playground Global investing in deep tech and helping lead fundraising, Ernest was confident his connections to both investors and founders would allow him to bridge that gap.
Instead of launching a formal VC fund, a process he says takes new managers anywhere from 12 to 18 months, Ernest used his network to secure allocations of stock in high-profile, later-stage companies. He then offers these individual deals to a group of about 30 smaller institutional investors using special purpose vehicles (SPVs), single-asset funds, and nominee structures. In the latter, his firm, Sabertooth Capital , holds shares on behalf of participating investors rather than through a traditional SPV.
Over the last 12 months, Sabertooth has invested nearly $500 million into 10 companies, including Anthropic, Base Power, Databricks, PsiQuantum, and SpaceX, according to Ernest. The firm treats each deal as its own separate fund, in most cases structuring it as an SPV, in which the fund's investors buy shares in the vehicle that owns the stock. He's writing checks ranging from $10 million to $275 million - meaning he's gaining significant chunks of shares - and always participating in official, company-approved funding rounds.
For more details please read the original article at TechCrunch AI.
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