Tide Rock Holdings, a San Diego and New York-based private equity firm, is taking a contrarian approach to artificial intelligence implementation by explicitly forbidding the use of AI for cost-cutting and efficiency measures. Instead, the $1 billion firm has deployed AI engineers for two years with a singular focus: driving business growth across its portfolio companies.
CEO Ryan Peddycord revealed that the company has a firm-wide mandate: “Don’t talk about using our resources in AI or tech to cut costs or create efficiencies.” This philosophy stands in stark contrast to the broader business landscape, where executives from Jamie Dimon to countless other CEOs tout AI’s potential for labor savings and operational efficiency.
Tide Rock’s unique business model helps explain this approach. The firm specializes in acquiring founder-run businesses valued under $10 million EBITDA, typically from entrepreneurs facing life transitions like retirement or family health issues. These founders are deeply protective of their legacies, employees, and brand reputation—making growth-focused strategies far more appealing than cost-cutting measures.
The firm’s AI implementation focuses on two primary areas. First, Tide Rock developed proprietary AI tools to identify acquisition targets in a market segment where traditional data platforms like Pitchbook and Crunchbase provide incomplete information. Second, and more significantly, the firm adapted this technology to help portfolio companies identify new customers and business opportunities.
Peddycord provided a concrete example: when aerospace companies like Blue Origin win major contracts, Tide Rock’s AI systems analyze public information to reverse-engineer the sub-component parts and services needed. This allows their manufacturing portfolio companies to approach potential customers early in the procurement process, particularly in high-growth sectors like aerospace and defense.
The results speak for themselves: Tide Rock’s portfolio companies have achieved 24% organic revenue growth annually since the firm’s launch 13 years ago, with only one losing investment over that period. The firm has completed over 50 acquisitions without using debt financing, maintaining its growth-focused philosophy throughout.
While Tide Rock is willing to use third-party AI applications that may reduce costs, Peddycord believes investing internal resources in cost-cutting AI tools is wasteful. “Everybody’s so focused on cost-cutting that third parties are going to pick off all the low-hanging fruit there,” he explained, suggesting the firm’s resources are better spent on revenue-generating AI applications.
Key Quotes
The mandate across the company is don’t talk about using our resources in AI or tech to cut costs or create efficiencies.
Tide Rock CEO Ryan Peddycord established this firm-wide policy to align AI implementation with the company’s growth-focused business model and to appeal to founder-sellers who care deeply about employee welfare and company legacy.
I have a belief that everybody’s so focused on cost-cutting that third parties are going to pick off all the low-hanging fruit there. So us trying to invest our dollars to go create things that other people are creating and probably investing more dollars to do isn’t the right place to spend our money.
Peddycord explains the firm’s strategic decision to focus internal AI development resources on revenue generation rather than efficiency, believing the market will provide adequate cost-cutting solutions independently.
When Blue Origin wins a large contract, there is some public information that we are able to gather to identify what it is that they won the contract for, and we can even reverse engineer what sub-component parts and services are going to be necessary to then go create that.
This quote illustrates a concrete example of how Tide Rock uses AI for business development, helping manufacturing portfolio companies identify and pursue new customer opportunities in aerospace and defense sectors.
In those high-growth areas like aerospace and defense, they are working as hard to find new qualified suppliers as we are to find new customers.
Peddycord highlights how AI-powered customer identification creates mutual value, positioning portfolio companies as solutions to procurement challenges rather than simply pursuing sales opportunities.
Our Take
Tide Rock’s approach challenges the prevailing wisdom that AI’s primary business value lies in cost reduction and automation. While most organizations rush to deploy AI for efficiency gains, this firm has identified a more sustainable competitive advantage: using AI to accelerate revenue growth in underserved market segments.
What’s particularly noteworthy is how this strategy aligns business incentives with social outcomes. By explicitly rejecting cost-cutting AI applications, Tide Rock addresses one of the technology’s most significant concerns—workforce displacement—while still capturing substantial value. The 24% annual growth rate suggests this isn’t merely ethical posturing but a genuinely effective business strategy.
This case study may prove especially relevant as AI capabilities mature beyond simple automation. The firm’s focus on proprietary data gathering and customer intelligence represents a more defensible competitive moat than cost-cutting tools that competitors can easily replicate through third-party vendors.
Why This Matters
This story represents a significant counternarrative in the AI adoption landscape, where cost reduction and efficiency gains dominate corporate AI strategies. As research predicts potentially catastrophic white-collar job losses and major CEOs emphasize productivity improvements, Tide Rock’s growth-only approach demonstrates an alternative path for AI implementation.
The implications extend beyond private equity. For businesses concerned about employee morale and retention during AI adoption, Tide Rock’s model shows how AI can be positioned as a growth enabler rather than a job threat. This approach may prove particularly valuable for companies acquiring or merging with other businesses, where cultural integration and employee trust are critical.
The firm’s success metrics—24% annual organic growth and only one losing deal in 13 years—suggest that growth-focused AI strategies can deliver strong financial returns without the social costs of workforce reductions. As AI capabilities continue expanding, Tide Rock’s philosophy may influence how other investment firms and operating companies approach AI implementation, particularly in sectors where talent retention and brand legacy matter significantly.
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Source: https://www.businessinsider.com/tide-rock-buy-out-firm-ai-cost-cutting-2025-12