How Justin Ernest invested nearly $400M into hot startups without a traditional VC fund

Justin Ernest has identified a significant gap in the venture capital landscape. Last year, he observed that family offices and smaller institutional investors were eager to invest in the most promising AI startups but found themselves locked out of these lucrative opportunities. Drawing on his five years of experience at Playground Global, where he specialized in deep tech investments, Ernest decided to leverage his extensive network to address this challenge. Rather than establishing a conventional VC fund—an endeavor he notes can take 12 to 18 months for new managers—Ernest utilized his connections to secure stock allocations in well-known, later-stage companies. He introduced these exclusive investment opportunities to a select group of around 30 smaller institutional investors through Special Purpose Vehicles (SPVs), structured as single-deal funds. Over the past year, his firm, Sabertooth VC, has funneled nearly $400 million into ten companies, including prominent names like Anthropic, Anduril, Databricks, PsiQuantum, and SpaceX. Each investment is treated as an independent fund, allowing his investors to buy shares in the SPVs that hold the stock. His checks range from $10 million to $275 million, enabling him to secure substantial equity stakes while always participating in officially sanctioned funding rounds. Sabertooth VC stands out in a field where family offices often seek equity in high-profile startups. Ernest has quickly garnered trust and substantial capital from these investors, thanks in part to his solid reputation in a space that can be murky with small allocations and SPVs targeting family offices. Benjamin Wagner, a CIO managing a family office, praised Ernest's authentic investment approach, emphasizing his technical expertise and sound judgment. Wagner's experience with PsiQuantum, valued at $7 billion, underscores this trust. When he sought a direct investment, the company's CFO recommended going through Sabertooth, solidifying Ernest's credibility in the eyes of investors. As startups like Anthropic and Anduril tighten regulations on unauthorized SPVs, investing via Sabertooth offers smaller limited partners peace of mind, knowing their funds are managed by a vetted and respected investor. Ernest, who overcame a childhood speech impediment, attributes his success in securing stock allocations to his broad network and strategic approach to relationship-building. He can typically gather investor capital for a new SPV quickly, relying on a trusted group of limited partners. Currently, Ernest aims to expand his business of raising funds for specific companies but ultimately aspires to establish a traditional venture fund. Achieving this goal is complex, yet he believes that the strong returns from his SPVs will validate his track record, a critical factor for attracting investors. Sabertooth has already celebrated a significant win with chipmaker Groq, which was acquired by Nvidia for $20 billion late last year. Looking ahead, Ernest is anticipating the highly awaited IPO of SpaceX this Friday, along with Anthropic's expected public listing later this year, which could bring even greater returns for his investors. Despite the challenges faced by SPVs in gaining the same prestige as traditional VC funds, Ernest remains confident that his strategy of starting with SPVs and building a reputable presence with family offices is the right path forward. "I wanted to be in the action," he said, reflecting on his choices. "I think this will end up being one of the best vintages of our lifetime."