South Loop Ventures Launches $21M Houston Tech Fund

South Loop Ventures Closes $21 Million Fund I

South Loop Ventures, a venture capital firm located in Houston, Texas, has announced the final closing of its inaugural $21 million Fund I. Rice Management Company and Chevron Technology Ventures served as key anchor investors in this funding round.

Focus on Seed and Pre-Seed Investments

Launched in 2022, the firm concentrates its investments on companies in the seed and pre-seed stages. The average investment check size is $400,000. A primary objective for South Loop Ventures is to provide backing to founders from diverse racial and ethnic backgrounds.

Founder's Perspective on the Final Close

Zach Ellis, founder and managing director of the firm, recently discussed the fund’s final close with TechCrunch. He indicated the fund’s investment strategy is geographically broad, targeting founders across the United States.

Sector Preferences

While nationwide in scope, the fund demonstrates a preference for sectors that align with Houston’s economic strengths. These include areas such as healthcare, energy, space exploration, and climate technology.

Additional Investors and Investment Goals

Texas Capital Bank and The Great Commission Foundation of the Episcopal Diocese of Texas also contributed to the investment round. To date, South Loop Ventures has completed 13 investments and intends to make at least 30 investments in total.

Addressing Diversity and Inclusion

Ellis emphasized the importance of a fund dedicated to supporting diverse founders within Houston, citing the city’s significant diversity – ranking as the fifth most diverse city in the nation. When questioned about potential concerns regarding the recent backlash against Diversity, Equity, and Inclusion (DEI) initiatives, Ellis responded directly.

Commitment to Accessible Venture Capital

“We firmly believe that venture capital should be universally accessible and that underrepresented, diverse teams present a compelling opportunity for substantial financial returns,” Ellis stated.

Ellis’s Background and Career Path

Despite his current dedication to Houston, Ellis originally comes from New Orleans and began his professional journey in the military. “Having always been driven by a strong sense of purpose, I transitioned to the corporate world after seven years of active duty in the Navy.”

From Healthcare Consulting to Venture Capital

His career path led him to work as a healthcare consultant, which subsequently introduced him to a corporate innovation group. This experience highlighted the potential of technology to streamline and improve everyday tasks.

Discovering the World of Venture Capital

“I was amazed to be compensated for this type of work,” he recalled. “A colleague then suggested I explore the world of venture capital.”

Experience at PepsiCo and Ohio State

Ellis expanded his network and eventually joined the corporate venture team at PepsiCo, where he focused on technology scouting, forging corporate partnerships, and investing in funds related to food and agriculture. He later moved to Ohio State, managing a fund dedicated to investing in Midwest-based venture capital funds and startups originating from the university.

The Catalyst for South Loop Ventures

“It was during this period, coinciding with the pandemic and the murder of George Floyd, that I had the opportunity to reflect on my career, my impact, and the frequent experience of being the sole Black or brown individual in any given room,” Ellis explained. “I felt compelled to effect change.”

Opportunity in Houston

A conversation with a friend in Houston revealed the city’s efforts to enhance its profile in the technology and innovation landscape. Stakeholders expressed a strong desire to support a fund specifically focused on backing founders of color, and many believed Ellis was the ideal leader for such an initiative.

Founding South Loop Ventures

This led Ellis to relocate to Houston and establish the foundation for South Loop Ventures.

Challenges in Fundraising

He characterized the fundraising process as “challenging.”

Navigating a Slowing Market

“We initiated fundraising as the market began to decelerate, and conditions continued to become more difficult,” he said. “Despite strong initial interest, it ultimately took 24 months to complete the fundraise.”

Building a Network of Support

Ellis attributed the success of the fundraise to his existing network of stakeholders, specifically acknowledging the assistance of Mercury Fund in connecting him with additional investors within the ecosystem.

Future Goals: Attracting Talent and Funding Innovation

Looking ahead, Ellis aims to attract more technology talent to Houston and, of course, invest in founders who are developing groundbreaking solutions.

Houston’s Appeal to Founders

“The city’s inherent appeal will naturally draw individuals to live here, which I believe will attract top-tier founders who will recognize not only the business opportunities but also feel a sense of belonging and comfort,” he said. “With South Loop’s support, we aim to empower them to succeed.”