South Loop Ventures closes $21M fund in Houston to build up local tech ecosystem

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South Loop Ventures, a Houston-based venture firm, announced a $21 million Fund I, with Rice Management Company and Chevron Technology Ventures serving as anchor investors. 

The firm, which launched in 2022, focuses on seed and pre-seed companies, with $400,000 as the average check size. It also primarily hopes to focus on backing founders of color. 

Zach Ellis, the firm’s founder and managing director, spoke to TechCrunch about his final close. 

He said the fund is general and will invest in founders nationwide, though it does have a preference for sectors that “reflect the industrial strength of Houston,” such as healthcare, energy, space, and climate. 

Texas Capital Bank and The Great Commission Foundation of the Episcopal Diocese of Texas also participated in the round. So far, South Loop has made 13 investments and hopes to invest in a total of at least 30. 

“We thought it was important to have a fund focused on diverse founders here in Houston, given Houston’s diversity,” he said. Houston is one of the nation’s most diverse cities, ranking at number five. Asked if he was worried about the anti-DEI backlash, as his fund targets founders of color, Ellis offered a simple response. 

“We strongly believe that venture capital should be accessible to everyone and that underinvested and diverse teams offer a unique opportunity for significant returns,” he said. 

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Despite his growing love for Houston, Ellis actually hails from New Orleans and started his career in the military. “I’ve always been a very mission-driven person, so after serving seven years active duty in the Navy, I transitioned to the corporate sector.”

That led him to work as a health care consultant, which later exposed him to a corporate innovation group. That group then taught him about how to use technology in a way that helps people with the mundane aspects of everyday life. 

“I was like, ‘I can’t believe we get paid to do this,’” he recalled. “And my colleague said, ‘You should see what the VCs do.” 

He networked until he landed on the corporate venture team at PepsiCo, where he performed a mix of technology scouting, corporate partnerships, and investing in food and agriculture-related funds. From there, he went to Ohio State, where he helped manage a pool of money to later invest in Midwest-focused VC funds and startups spun from the university. 

“It was around that time that the pandemic happened, the George Floyd murder happened, and I was able to reflect on my career and the impact I was having and the fact that I was often the only Black or brown face in any room that I was in,” Ellis said. “I wanted to do something about it.” 

Serendipitously, he received a call from a friend in Houston, who told him that the city was working to raise its profile in tech and innovation. His friend, in particular, said many stakeholders had an appetite to support a fund backing founders of color. That, and he had already told many of them that Ellis would be the perfect person to lead one. 

So, Ellis came down to Houston and birthed the idea for South Loop Ventures. 

He described the fundraising process as “difficult.” 

“We began just as the market started to slow down, and it continued to become more challenging,” he said. “While we had strong initial momentum, it ultimately took us 24 months to complete.” 

He met most of the fund’s current investors through a network of stakeholders, adding that Mercury Fund in particular helped connect him with other investors in the ecosystem. Next, Ellis is hoping to lure in some more tech talent to the city. That, and, of course, pour some money into founders looking to build the next big thing. 

“People are naturally drawn to live here, which I believe will help attract top-tier founders who will see not only the business opportunities but also feel welcome and comfortable,” he said. “With South Loop’s support, we aim to ensure they also feel empowered.”