We all have our own south side that we think of immediately.
When I first saw the name South Loop Ventures, I thought of Chicago, where I lived for almost six years—and I told Zach Ellis, the Houston-based firm’s managing director and founder, as much. The firm’s name references Houston’s South Loop, which connects various historically diverse neighborhoods and is near the historically Black Third Ward, Beyoncé’s birthplace. But the fact that I thought of my own touchpoint is, actually, somewhat ideal.
“It’s not just Chicago, there are all these regions around the country where diverse communities are,” said Ellis, who served as a U.S. Naval Officer before he was a VC. “South Central Los Angeles, Southeast D.C., South Philly, South Bronx, Southwest Atlanta—SWATS—all these areas. You’re ‘othered’ because you’re from the wrong side of the tracks, and you get this neighborhood affiliation. But it also becomes this point of pride. I’ve even played with the idea of one of our slogans, being ‘we’re all from the south side of somewhere.’”
Ellis recently launched South Loop’s first $21 million fund. Rice Management Company and Chevron Technology Ventures served as anchor LPs, with additional backing from Texas Capital Bank and The Great Commission Foundation of the Episcopal Diocese of Texas. It’s a busy time for Ellis, who was just this week announced as a Kauffman Fellow, the longstanding VC leadership development program. He’s building South Loop Ventures—just an hour’s drive from Galveston, where the Juneteenth holiday has its historical origins—on a strategy that looks quite rebellious right about now: Investing in entrepreneurs of color in Houston and similar urban ecosystems, who are working on problem-solving in sectors like healthcare, biotech, and advanced materials.
“I don’t do this out of a sense of fairness,” said Ellis, who was previously manager at CVC PepsiCo Technology Ventures and managing director at Rev1 Ventures. “I do this out of a core belief that intentional innovation is good for society. We have problems that need solving and it’d be a crime not to get as many brains as possible trying to solve these problems. Why leave talent on the bench and profit on the bench by not investing in everyone?”
South Loop’s portfolio currently includes breast milk freeze-drying company Milkify, life science sales AI platform PraxisPro, AI-powered tax software SmartWiz, and AI drug discovery platform CircNova. The firm invests beyond Houston, but it does represent a significant bet on the city and on Texas—which is home to four of the ten fastest-growing counties in the U.S. by percentage growth. Ellis looks to build on Texas’ talent, institutions, and economic strength to generate outsized returns in a high-potential market that remains underserved. When most people think of tech in Texas, they probably think of Austin—but Houston has the right ingredients to be a hub in its own right, he said.
“Houston has the third-most Fortune 500 companies of any city in the country,” said Ellis. “If you think about the IT departments, the engineers at energy companies—from mechanical engineers to systems engineers—the talent is here. It’s just about awakening that talent.”
See you tomorrow,
Allie GarfinkleX: @agarfinksEmail: [email protected] a deal for the Term Sheet newsletter here.
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This story was originally featured on Fortune.com
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