Finding Opportunity in Disruption: How One Operationally Focused Investment Firm Picks and Chooses Its Greatest Winners

After 30 years of experience in the investment industry, including a decade as a serial entrepreneur, Terry Graunke says that there has never been a time so ripe with opportunities for businesses to succeed. “It’s a unique moment,” says Graunke, founder, chairman, and CEO of operationally focused firm Erie Street. “There’s a ridiculous abundance of capital—capital is no longer the constraining piece to growing great businesses.”

Many companies have recognized that the past two years have been a unique time to scale their operations, especially in the digital spaces that are now so crucial to success. Call it “disruption,” if you must, but seasoned investment experts like Graunke understand that the upheaval of business norms in an uncertain time is a moment of truth—and leaning into disruption is a way for companies to create transformational growth.

For Chicago-based Erie Street, founded in 2018, the opportunity for growth, Graunke says, lies in building the strategic value of the businesses the firm invests in, and that’s what keeps things exciting. “We have a never-ending flow of interesting things to look at,” he says. “We probably look at 100 or 200 deals a year, to narrow it down to one.”

The disruption during 2020 and the first half of 2021 brought about an unprecedented digital transformation that has made an impact on consumers and executives alike: It forced businesses to upgrade their digital marketing and customer experiences, while firming up their infrastructure security. It is a chance for businesses to leap forward, says Graunke—and companies that work with partners like Erie Street are seeing next-level growth.

“Leaders of companies in disrupted markets know they need to move at the speed of change, but often can’t do it all on their own—there’s just too much ground to cover,” says Rick Eiserman, CEO of Trailer Park Group, one of the entertainment industry’s leading marketing firms. “The Erie Street partnership is an accelerant. With their operational experience and on-the-ground support, we are evolving the business to meet the needs of staff and clients in the context of today’s changing media, entertainment, and technology landscape.”

To find potential partners in which to invest, Erie Street seeks out companies that not only possess a disruptive business model, preferably in the digital professional services space, but also exhibit three key qualities that align with the firm’s values: curiosity, kindness, and courage.

In an era where business is changing at breakneck pace, “there’s a real need for leaders in today’s disruptive environment who have empathy and understanding—but also the desire and ability to craft a vision and lead their teams toward a greater outcome,” says Jerry Graunke, president of Erie Street. “The best of today’s leaders have leaned into disruption as an opportunity to transform their organizations, while having empathy toward the clients and staff, as well as an understanding of the balance that we’re all trying to achieve in this new world.”

In the four years since its launch, Erie Street has invested in six companies. This exclusivity is by design: It’s a chance for the firm to get operationally involved with the businesses, helping with day-to-day decision-making. Recent investments include Lacey Lake Leadership, a leadership advisory firm; Performance Improvement Partners, a technology consultancy for the private equity industry; APCO Worldwide, a leading advisory and communications consultancy firm and majority women-owned business; and Trailer Park Group, which Erie Street is helping with transformation in the context of digital disruption. Half of the businesses Erie Street invests in are women-owned, and the firm works with founder-led businesses on a scale that is rare in the industry.

“Erie Street understands how businesses like mine work, and they have the skills needed to add value where it makes the biggest difference while respecting those things that are best left to management,” says Margery Kraus, founder and executive chairman of APCO Worldwide. “They recognize that hard work and success needs to be rewarded, and the importance of staff in the process of growth. Erie Street is not just interested in the numbers but also has a real curiosity about our business and our business impact.”

“What we look for in founders is a desire and an interest in transformation. We’re looking for a true partner,” says Jerry Graunke. “We are not the kind of partners who show up every eight weeks and come to a board meeting. We’re very engaged. And we’re looking for a partner that lights up when that happens.”

Rather than focus on funding from institutional investors, Erie Street draws capital from a pool of ultra-high-net-worth families who have the ability to invest in both Erie Street and its partner companies. It’s a chance to build on the opportunities that private equity affords, with added flexibility. “Our differentiated approach allows us to focus on people, the staff and clients, of our partner companies. We don’t have to sell things at a given time, which allows us to align our time and capital with their best interests,” says Terry Graunke.

That structure also means that the firm can be selective about the businesses it chooses to partner with. It is what has set Erie Street apart from the very beginning: a hands-on approach that the Graunkes find thrilling.