How Justin Ernest invested nearly $500M into hot startups without a traditional VC fund
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.
Key Takeaways
- 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.
- 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.
Sabertooth is not the only firm offering family offices an opportunity to purchase equity in individual high-profile, late-stage startups.
- "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.
- Ernest credits his ability to secure allocations of stock when highly coveted tech companies are raising to his wide 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.
- However, his ultimate goal is to eventually raise a traditional venture fund.
Stats & Key Facts
- #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.
- #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.
- #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.
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.
Sabertooth is not the only firm offering family offices an opportunity to purchase equity in individual high-profile, late-stage startups. However, Ernest quickly raised a significant amount of cash from them because, in the sometimes-shady world of small allocations and SPVs targeting family offices, he's earned a solid reputation. "Justin is authentically an investor," said Benjamin Wagner, a CIO for a family office managing the wealth of 50 individuals.
For more details please read the original article at TechCrunch AI.
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