How Justin Ernst invested nearly $400 million in hot startups without the need for a traditional venture capital fund

Last year, Justin Ernst noticed a huge gap in how venture capital worked: Family offices and smaller institutional investors were eager to invest in the fastest-growing AI companies, but they couldn’t reach those cap tables.

Having spent more than five years at Playground Global investing in deep technology and helping lead fundraising, Ernst was confident that his relationships with both investors and founders would allow him to bridge this gap.

Instead of launching a formal venture capital fund, a process he says takes 12 to 18 months for new managers, Ernst used his network to secure equity allocations in high-profile, later-stage companies. It then offers these individual trades to a group of about 30 small institutional investors using special purpose vehicles (SPVs), which operate as single deal funds.

Over the past 12 months, his Sabertooth VC firm has invested nearly $400 million in 10 companies, including Anthropic, Anduril, Databricks, PsiQuantum, and SpaceX. The company treats each deal as its own separate fund, and in most cases structures it as a special purpose vehicle, where the fund’s investors buy shares in the vehicle that owns the stock.

He writes checks ranging from $10 million to $275 million — meaning he gets big chunks of equity — and always participates in official company-approved financing rounds.

Sabertooth isn’t the only company offering family offices the opportunity to buy equity in high-profile, late-stage individual startups. However, Ernest soon made a significant amount of money from them, because in the sometimes shady world of small allotments and SPACs targeting family offices, he had gained a reputation.

“Justin is a true investor,” said Benjamin Wagner, IT director at a family office that manages the wealth of 50 individuals. “He has judgment, he has experience, and he is very technical, which really sets him apart from other organizations that tend, in my opinion, to just try to accumulate capital.”

When Wagner tried to invest directly in PsiQuantum, the quantum computing startup that was last valued at $7 billion, the company’s CFO suggested he invest through Sabertooth.

“So, the first time I met you [Ernest]”I knew it was legitimate,” Wagner said. “Justin’s access is definitely different from some of these organizations that work at night.”

This verification is very important. At a time when startups like Anthropic and Anduril are cracking down on unauthorized SPACs, investing through Sabertooth gives smaller limited partners peace of mind. They know they are entrusting their money to an investor who is directly vetted and respected by the companies themselves.

Beyond technical knowledge, the Harvard Business School graduate honed his communication skills after largely overcoming his childhood speech impediment. Ernst credits his ability to secure equity allocation when highly sought-after technology companies expand into his extensive network.

“I’ve always found that my superpower is the core of my network, and I like to use that and leverage it in a very strategic way,” he told TechCrunch.

For example, he can generally obtain investor capital for a new SPAC from family offices within a tight timeline.

“I have a captive collection of LPs,” he said. “I can usually make four, five, six phone calls, and I know exactly what my LP is going to commit to.”

Ernst told TechCrunch that for now, he wants to continue growing his business of raising money for specific companies on behalf of his dedicated LP base. However, his ultimate goal is to eventually raise a traditional mutual fund. That’s a tough task, but he believes Sabertooth’s strong returns across these one-time SPACs prove its track record, something investors care more about when deciding to back a new fund.

He is on his way with this desire. Sabertooth already has one big payout from chipmaker Groq, which was licensed and acquired by Nvidia for $20 billion late last year. Next up is SpaceX’s anticipated IPO on Friday, along with Anthropic’s expected public listing later this year. They are willing to make greater profits for their investors.

But SPACs don’t have the same kind of credibility as traditional venture capital funds. However, Ernst remains confident that starting with them, and gaining a strong representative in the family offices, rather than launching a start-up venture fund and competing with competitors, was the right strategic move. “I wanted to be in the action,” he said. “I think this will end up being one of the best wines of our lives.”