Born to Jewish parents, Grauman and his father went to Dawson City, Yukon, for the Gold Rush when he was a young man. He worked there as a paperboy. Since newspapers were scarce, they could command a dollar each. Grauman told a story about a store owner who purchased a newspaper from him for $50. The shopkeeper then read the paper aloud in his store, charging admission to local miners. In the Yukon, the young Grauman learned a lesson which would serve him the rest of his life: that people would willingly pay handsomely for entertainment. Sid and his father began organizing events like boxing matches, which paid them well. It was also in the Yukon that Grauman saw his first motion picture. A failed prospector in the Klondike gold rush, David Grauman initially took his young son to the Klondike with the idea of building a theater there. Though they did not strike gold, both of the Graumans were made considerably wealthy by their Klondike entertainment activities. When his father's sister became ill and he left the territory to care for her, young Grauman remained in Dawson City for a time. His parents settled in San Francisco and Grauman joined them there in 1900.