Last year, Justin Earnest noticed a huge gap in how venture capital works. Family offices and small institutional investors were eager to invest in fast-growing AI companies, but lacked access to their cap tables.
Having spent more than five years helping lead deep technology investments and fundraising at Playground Global, Ernest believed he could bridge that gap through his connections with both investors and founders.
Instead of launching a formal VC fund (a process he says takes 12 to 18 months for a new manager), Earnest used his network to secure equity allocations in high-profile late-stage companies. We then propose these individual transactions to a group of approximately 30 small institutional investors using special purpose vehicles (SPVs), single asset funds, and nominee structures. In the latter case, his firm, Sabretooth Capital, holds the shares on behalf of participating investors rather than through a traditional SPV.
Sabertooth has invested nearly $500 million in 10 companies over the past 12 months, including Anthropic, Anduril, Base Power, Databricks, PsiQuantum, and SpaceX. The company treats each transaction as its own separate fund, most often organized as an SPV that buys shares in a vehicle in which the fund's investors own shares.
He writes checks ranging from $10 million to $275 million, meaning he gets a sizable stake, and always participates in formal company-approved funding rounds.
Sabertooth is not the only company offering family offices the opportunity to buy stakes in individual high-profile late-stage startups. But Ernest has developed a solid reputation in the sometimes shady world of small assignments and SPVs targeting family offices, and he was quick to raise large sums of cash from them.
“Justin is a true investor,” says Benjamin Wagner, CIO of a family office that manages assets for 50 individuals. “He has judgment, he has expertise, he is very technical, and that, in my opinion, is very different from other organizations that tend to just try to raise capital.”
When Wagner wanted to invest directly in PsiQuantum, a quantum computing startup that was last valued at $7 billion, the company's CFO suggested investing through Sabertooth.
“So, when we first met, [Ernest]”I knew he was legitimate,” Wagner said, adding, “Justin's access is definitely different than some of these nocturnal organizations.”
Verification is very important. With startups like Anthropic and Anduril cracking down on unlicensed SPVs, investing through Sabertooth can provide some peace of mind for smaller limited partners. They know they are entrusting their money to investors who are vetted and respected directly by the companies themselves.
After nearly overcoming a childhood speech impediment, this Harvard Business School graduate honed his communication skills beyond technical knowledge. Ernest values his ability to secure equity allocations as highly coveted technology companies raise capital for his extensive network.
“I've always been aware that superpowers like myself are the core of my network, and I like to leverage that in very strategic ways,” he told TechCrunch.
For example, he is typically able to raise investor funds for a new SPV from a family office on a tight schedule.
“I have a captive set of LPs,” he said. “I can usually make four, five, six phone calls and know exactly what the LP promises.”
Earnest told TechCrunch that for now, he wants to continue growing his business, which raises money for specific companies on behalf of a dedicated LP base. But his ultimate goal is to eventually raise traditional venture funding. That's a challenge, but he believes Sabretooth can prove its track record by delivering strong returns through these one-off SPVs, which is what investors look for most when deciding to back a new fund.
He is moving forward with that wish. Sabertooth has already made significant profits from chipmaker Groq, which was licensed to Nvidia and acquired for $20 billion late last year. Next up is SpaceX's long-awaited IPO this Friday, and Anthropic's listing expected later this year. They are poised to deliver even greater returns to his investors.
However, SPVs do not have the street cred of traditional VC funds. But Earnest remains convinced that starting with them and building a solid reputation with family offices was the right strategic move, rather than launching an upstart venture fund and competing with competitors. “I wanted to be part of the action,” he said. “I think this will be one of the best vintages of our lives.”
Updated to reflect Sabertooth's total deployed capital.
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