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 Garfinkle
X: @agarfinks
Email: [email protected]
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Nina Ajemian curated the deals section of today’s newsletter. Subscribe here.

This story was originally featured on Fortune.com

© South Loop Ventures

They met at 10 p.m. each weeknight, after class at Columbia University.

Sometimes talking over Zoom until 2 AM, Anish Agarwal, Raaz Dwivedi, Ahmed Lone, and Raj Agrawal talked about what it might mean to walk away from their lives—for a startup. All academics in some form or fashion, the group swapped ideas at the intersection of their research: causal machine learning, reinforcement learning, and AI agents.

For Agarwal, the decision wasn’t to be taken lightly. That semester, he’d just started a tenure-track position at Columbia after earning his PhD from MIT—he had an academic career that was taking shape. But he was drawn to the entrepreneurial unknown. 

“I had to get in the game,” said Agarwal, who’s originally from Singapore. “I was looking around at my peers—for example, at Cartesia and Reflection AI. They’re all super smart, and out here building companies. By DNA, they’re researchers with some commercial instinct. They’re solving really hard technical problems, and continuing to produce research in a very cool package. That felt right. That was my motivation.”

From those late-night meetings came Traversal, a startup founded in 2023 that focuses on observability and site reliability engineering (SRE)—helping engineers pinpoint and troubleshoot complex software failures with speed and precision. Troubleshooting is “one of the most complex workflows in software,” said Agarwal, Traversal’s CEO. “It’s why you can have 50 people firefighting in a war room until they find the answer.”

Today, Traversal launches from stealth with $48 million in funding from its seed and Series A rounds, Fortune has exclusively learned. Sequoia led the company’s seed round, while Kleiner Perkins led Traversal’s Series A. Nat Friedman and Daniel Gross’s NFDG and Hanabi are also investors. Traversal—named for both the computer science concept of a graph traversal and the idea of journeying through complex systems—counts among its customers Digital Ocean, Eventbrite, Cloudways, and a number of undisclosed Fortune 100 financial services companies. The company and others like it exist to stop software infrastructure crises and limit downtime. 

“Imagine you’re having a heart attack right now,” said Agarwal. “That’s the only thing that matters. It doesn’t matter what happens ten minutes from now, or what your dinner is going to look like. An engineering team has two heart attacks a week, and a debilitating condition. So, you never get time to think about planning ahead and being great.”

The bigger the company, the higher the stakes of this problem: Bratin Saha, chief technology and product officer at DigitalOcean, said via email that “the sheer volume and complexity of our cloud infrastructure—serving hundreds of thousands of customers—means that even minor platform incidents can quickly escalate, impacting customer experience and incurring significant costs.” Saha told Fortune that, over six months, Traversal has helped resolve problems 37% faster. Traversal’s traction over the last two years is both a product of this moment in tech, the AI wave—and timeless. 

“Whenever something new shows up, whether it’s a new trend, new market, new kind of product, or a new kind of technology, guess what? It needs to be monitored,” Sequoia partner Bogomil Balkansky said. “That’s observability. And it needs to be secured, which is security. And that’s why those two domains—observability and security—periodically produce big winners.”

Some winners from observability in recent years that Balkansky points out: Splunk, Datadog, Dynatrace, AppDynamics, and New Relic. For Traversal—which sits at the intersection of observability and AI, and builds on existing observability tools—this means there’s opportunity, especially given that the company’s riding the vibe coding wave.

“The amount of code being written was already growing at a staggering rate, and with AI code generation, it’s accelerating like never before,” said Kleiner Perkins partner Mamoon Hamid. “With more code created by AI, there is more surface area to troubleshoot. There is a need for AI to autonomously troubleshoot, mediate and even prevent complex incidents at scale—self-healing codegen.”

The academic-to-entrepreneur path that Agarwal and his cofounders now walk is well-trod, from VMware’s Mendel Rosenblum to Databricks’s Ali Ghodsi, and more. And though there’s much they don’t have in common, academic research and startups do share at least one key feature. 

“Most jobs, you’re at A and you have to get to B, and getting from A to B is really hard,” said Agarwal. “In research, though, you don’t really know where A is and you don’t know where B is. And even if you do know, it’s still very hard to get to—and I loved that. I enjoyed the uncertainty.” 

ICYMI...Here’s our exclusive on the New York-based health tech startup Tennr, which raised a $101 million Series C at a $605 million valuation to tackle the convoluted web of patient referrals.

Here we go again…Elon Musk’s xAI, according to Bloomberg, is in talks to raise $4.3 billion, adding to the $5 billion in debt he’s seeking for the company.

See you tomorrow,

Allie Garfinkle
X: @agarfinks
Email: [email protected]
Submit a deal for the Term Sheet newsletter here.

Nina Ajemian curated the deals section of today’s newsletter. Subscribe here.

This story was originally featured on Fortune.com

© Traversal

Enterprise SaaS M&A is caught between rebound and a rut. 

Consider, first, the good news, of which there’s quite a bit: Q1 2025 saw 210 enterprise SaaS mergers and acquisitions get done, a number on par with the 211 deals inked in Q4 2024, according to recent PitchBook data. That’s also a sizable jump from the beginning of Q1 2024, which saw 165 enterprise SaaS mergers and acquisitions.

Additionally, the total value for VC-backed M&A in enterprise SaaS went up in Q1—hitting $14.6 billion, according to PitchBook—while private equity-led deal count hit a new quarterly record for the sector at 73 deals. 

Now, consider the less-good news: The total deal value for enterprise SaaS M&A in Q1 2025 is down quarter-over-quarter by about 24.8%—from $38.7 billion in Q4, to $29.1 billion this past quarter. What’s more, five deals account for about half of the total transaction value across the quarter: Clearlake Capital Group’s $5.3 billion buyout of medical software company ModMed, KKR-backed Cotiviti’s $3.1 billion buyout of healthcare data entity Edifecs, ServiceNow’s $2.9 billion acquisition of enterprise AI tool unicorn Moveworks, CoreWeave’s $1.7 billion acquisition of AI developer startup Weights & Biases, and DNEG Group’s $1.4 billion buyout of Hollywood-focused generative media startup Metaphysic. (Though jarring, we’ve seen skews like this before, notably when it comes to how AI investing is shaking out—a landscape where it looks like there’s lots of action in total deal value, but upon closer inspection, the data reveals a gravitation towards surer, more established bets.)

So, what does all this mean? I think it comes down to two things. The first: AI is underpinning a new wave of enterprise SaaS deals and, despite lingering regulatory and macro pressures, dealmakers are getting comfortable rolling the dice again on market-moving transactions. And second: At the same time, the future remains uncertain, both in terms of how regulatory scrutiny will look in the U.S. and abroad over the company years, and the level of macroeconomic volatility that may (or may not) be coming down the pike. 

And that’s how you end up, for now, between a full-fledged rebound and a persistent rut. My guess, here and now, on June 17: We could see a more decisive recovery by the end of the year. Any takers? As always, I would love to hear what you think.

See you tomorrow,

Allie Garfinkle
X: @agarfinks
Email: [email protected]
Submit a deal for the Term Sheet newsletter here.

Nina Ajemian curated the deals section of today’s newsletter. Subscribe here.

This story was originally featured on Fortune.com

© Tyler Miller—Sportsfile for Web Summit via Getty Images

At 16, Jarah Euston landed her first job at a Party City—on the better days, as the balloon person.

“It was my first job ever, and I blew up the balloons with the helium,” she said. “But the worst possible job you could have at Party City was called go-backs—take a shopping cart full of tchotchkes that parents didn’t actually want to buy and put them back on the pegboard. You have to find, say, where this Teenage Mutant Ninja Turtle goody bag goes, and hang it back up.”

Euston, who grew up in Fresno, Calif, is now the CEO and cofounder of flexible labor platform WorkWhile. The startup, which she founded in 2019 after stints at Yahoo and Nexla, focuses on people working the “frontline,” hourly jobs that she says are the norm in places like Fresno.

“I want to build something for the people I grew up with, the people who work frontline jobs in Fresno,” she told Fortune. “And not just the people in Fresno, but the 80 million Americans working hourly jobs. It’s more than half of the U.S. labor force. And globally, 80% of all workers are working these types of jobs. So, how do we apply technology to improve their situation?”

For Euston, part of the solution lay in flexibility—technology that sets up a marketplace where workers can be matched with temporary jobs, adjusting their roles, schedules, and locations to better shape and control their workweek. Six years in, the platform now serves over one million users and employs 63 people.

Now, the startup has raised a $23 million Series B, Fortune has exclusively learned. Rethink Impact led the round, with participation from returning investors Khosla Ventures and Reach Capital. Citi Impact Fund, GingerBread Capital, and Illumen Capital also invested. Simon Khalaf, ex-CEO of fintech Marqeta, also recently joined WorkWhile as COO. The startup has worked with vendors serving Taylor Swift’s Eras Tour, the Super Bowl, NASCAR, the NCAA Final Four, Comic-Con, Edible Arrangements, Thistle, and Worldpac. 

WorkWhile’s rise signals that the gig economy is maturing—but many of its long-standing controversies remain. In 2024, the company became tangled in a familiar legal battle for gig companies: it was sued by the San Francisco City Attorney, who alleged WorkWhile had misclassified the workers on its platform as independent contractors, denying them the rights and benefits afforded to employees.

The case is part of the ongoing fallout from California’s Proposition 22, the 2020 ballot initiative that classified most gig workers as independent contractors. In December 2024, WorkWhile agreed to a partial $1 million settlement and committed to reclassifying its non-driver workers as employees. Litigation over the classification of delivery drivers, however, is still ongoing.

“Prop 22 is the law of the land and was upheld by the California Supreme Court, affirming this important right of drivers to work as independent contractors,” Euston added via email. “Our platform users have been very clear with us: they want flexibility. We respect our users’ right to work flexibly and will continue to advocate for it.”

Josh Queenan, a WorkWhile user the company connected me with, said he deeply values the flexibility the platform offers—and that it’s helped him transform his financial life. He told Fortune he earns an extra $5,000 to $6,000 a month, which he puts toward stock investments and is looking to use to buy investment property.

“If I want to cancel a shift, I just give a 24 hour notice, and press the cancel button,” said Queenan. “I have peace of mind, I know that somebody else is going to pick up the shift and that the company we work with isn’t going to be screwed. That’s a huge selling point for WorkWhile.”

For her part, Euston still regularly works shifts via WorkWhile. 

“It keeps you up at night, I want to make sure workers on the platform feel they’re the center of WorkWhile,” she said. “That’s why we’re at a startup. The whole point is to help people earn a better living and live better lives. If we don’t put them front and center, that won’t happen. That’s why we try to work shifts.”

So, in some ways Euston’s Party City days are long gone, and in others they’re close—lots of the shifts she works are similar kinds of jobs. With one exception: last year, she took a gig at the Eras Tour last year. 

“My job was crowd control,” Euston laughed. “I was telling people ‘you can’t dance on the chairs.’ And as the night went on, the moms got progressively more loosey goosey!” 

This story was originally featured on Fortune.com

© WorkWhile