Over the course of his professional career, Dr. Rausser has been an active entrepreneur. He has managed trading operations, provided economic consulting services, invested in and helped to grow start-up companies, and supported diverse enterprises in the health-care industry.
His interest in the business application of economic principles dates back to his upbringing on a small family dairy farm, where understanding risk was a key part of day-to-day decision making. Years later, while Dr. Rausser was beginning his doctoral dissertation, teaching graduate Ph.D. courses, and advising and mentoring other Ph.D. students, his father died suddenly. So, in addition to all his academic activities, Dr. Rausser took over managing the family farm. During the next three years, while he continued to farm, do research, and teach, he discovered many complementarities between real-world decision making and his academic research interests.
Trading on Commodity Futures and Derivative Markets
Dr. Rausser began his career as an entrepreneur while a young faculty member at Harvard University. He registered as a commodity trading advisor with the Commodity Futures Trading Commission and founded a hedge fund focused on regulated futures and options markets, including basic commodities, fixed-income investments, foreign exchange, energy, lumber, and over-the-counter (OTC) derivative transactions.
Dr. Rausser sold this enterprise when he accepted successive governmental appointments in Washington, DC (1986–1990). But based on his experiences in financial markets, Dr. Rausser published several refereed journal articles on the topic of futures markets and their linkages. A number of these articles received outstanding research awards.
Once he returned to the private sector, Dr. Rausser resumed his involvement in both regulated and OTC-traded markets. He has advised exchanges and clearinghouses, developed proprietary risk-management systems, and provided seed capital to start several trading-related businesses. One of these enterprises, Peak6 Investments, LLP, has become one of the country’s most successful equity-options trading firms. Together, Dr. Rausser and Peak 6 Investments co-founded Opt4 Derivatives, a company that focused on the development of intellectual property to support complex OTC transactions.
An Early Patent
While he was working for Opt4 Derivatives, Dr. Rausser and his colleagues invented a new mechanism for valuing financial contracts. A patent for this innovation, titled “Integrated Electronic Exchange of Structured Contracts with Dynamic Risk-Based Transaction Permissioning,” was issued in April, 2010, by the US Patent Office. The patent covers a proprietary system of ex ante risk control and real-time mark-to-market evaluation of structured financial contracts. It incorporates tools that enable real-time valuation of complex portfolios of option transactions. Dr. Rausser has applied this and related methods in order to design and implement decision-support risk analysis and structured financial contracts that separate market risk from credit risk. Several major corporate clients have used this method. In 2004, after venture capital interests were acquired, Op4 Derivatives morphed into OnPoint Analytics, which Dr. Rausser co-founded and whose Board of Directors he currently chairs.
Another offshoot of Opt4 Derivatives is OTC Online, which Dr. Rausser also co-founded, and whose Board of Directors he also currently chairs. OTC Online develops platforms for centralized clearing of OTC transactions.
Dr. Rausser also helped found and is a principal investor in Chicago Alternative Investment Partners (CAIP), a company that is developing new tradable indices covering intellectual property and patents, private equity, venture capital, and rule-based selection of alternative hedge-fund managers.
Based on his expertise in finance, Dr. Rausser was also elected to serve on the Board of Directors of the Pacific Mercantile Bank, a public commercial company, and served in this role from 2009 through 2012.
Law and Economics Consulting
Because his academic and business interests are so broad, Dr. Rausser has been much sought-after as a business consultant and litigation expert. In 1988, drawing on this experience, Dr. Rausser—along with three other Berkeley professors from Economics, Business, and Boalt Hall School of Law—co-founded the Law and Economics Consulting Group (LECG). The company grew from three employees to more than 600 employees and opened offices in the United States, Canada, Europe, Asia, Australia, and New Zealand. LECG was taken public in 1997 on the New York Stock Exchange.
In 2000, Dr. Rausser led a business-consulting team that was acquired by Charles River Associates (currently Charles River International), a publicly-traded company on the NASDAQ. During his five-year exclusive contract with Charles River Associates, the value of the shares of this company increased 400 percent.
Charles River Associates Securities and Exchange Commission Form 10-K December 2000
As noted previously, in 2004 Dr. Rausser co-founded OnPoint Analytics, through which he continues to provide litigation and business-consulting services. As one of OnPoint Analytics’ several highly regarded experts, Dr. Rausser performs statistical, economic, and financial analysis for a broad array of applications.
In the field of health economics, Dr. Rausser helped establish US Diagnostics. He provided strategic advice for this company and served on its Board of Directors both before and after it became a publicly traded organization on the NASDAQ.
Dr. Rausser was also an investor in a subsequent health-care company, Diversified Therapy Corporation (DTC). Upon discovering that one of the principals had failed to disclose an SEC action against himself, Dr. Rausser orchestrated an offering for all shareholders to redeem and recover their investments in DTC due to the failure to disclose. After a subset of the investors chose to be made whole with regard to their initial investments, Dr. Rausser led a restructuring of DTC and continued to serve on its Board of Directors until the company was sold in 2006. At the time of its sale, DTC had more than 100 shareholders. These shareholders elected Dr. Rausser to serve as their single representative and to shepherd the escrow amount on warranties and representation as well as future shareholder compensation for potential future earn-out (2006–11).
During this same period, Dr. Rausser was an “angel” investor in and served on the Board of Directors of OnCURE Medical, a health-care company focusing on cancer therapies. Still later, Dr. Rausser served on the Board of Directors of Integrated Oncology Network, LLC, another cancer-care enterprise (2009–12). Dr. Rausser was also elected Chairman of the Asthma and Allergy Prevention Company in 2011.
Software for Business Applications
Dr. Rausser has also provided entrepreneurial guidance for several software-development companies. He was elected to the Board of Directors of Equity Administration Solutions, Inc. (EASi), a software-for-service company that has established new web-based services for monitoring employee option and performance-based incentive compensation. In 2012, he was elected Chairman of EASi’s Board of Directors. In 2011, Dr. Rausser was also named to the Board of Directors of iVu Technologies, another software-for-service company.
In the spirit of entrepreneurship, while Dean of the College of Natural Resources, Dr. Rausser developed a negotiation and bargaining process designed to secure significant private-sector investment for biotechnology research on the UC Berkeley campus. Dr. Rausser realized, while serving on the Chancellor’s Biology Council, that the approach the faculty and administration were taking to forging a public-private R&D program was unlikely to succeed.
The process Dr. Rausser designed began with an open invitation to major plant-biotechnology firms around the globe to submit proposals for university research partnership funding. From among the proposals submitted, those of four major companies were selected to proceed to the next round. Driven by economic interest in securing licensing rights for possible new research discoveries, each of these four firms then submitted a more detailed proposal. When campus leadership determined that one of the proposals met all of the university’s standards, the agreement was signed and the partnership was launched.
UC Berkeley’s first priority in this agreement was to maintain (and even enhance) academic freedom while accessing the unique non-codified intellectual property that the company controlled. The allocation of research funds was entirely controlled by the Berkeley faculty, and no violation of researchers’ rights was permitted. Nonetheless, this innovative approach to securing research funding generated controversy.
From The Oakland Tribune, November 24, 1998
BERKELEY—UC Berkeley officials Monday signed a pioneering $25 million agreement with a Swiss company to fund basic faculty plant genetics research and walked right into a pie-in-the-face attack and a student protest.
The two pies—intended as a protest about genetically engineered foods—came from two members of a group called the Biotic Baking Brigade. [. . .] The first pie was thrown at Gordon Rausser, dean of UC Berkeley’s College of Natural Resources, at a press conference [. . . .] The pastry zapped a blackboard after Rausser, showing the form he learned as a boxer, deftly ducked away.
Despite the controversy, the experiment generated $25 million in unencumbered funds. This money made possible important fundamental research and a dramatically improved graduate Ph.D. program. An ex post evaluation that was performed by the Berkeley campus and a review conducted by the chancellor concluded that the academic program in plant biotechnology had been enhanced and that academic freedom had been maintained. The public-private partnership designed by Dr. Rausser also preceded a $500 million public-private research partnership that was later established between British Petroleum, UC Berkeley, and the University of Illinois at Urbana-Champaign. That funding established UC Berkeley’s Energy Biosciences Institute, whose mission is to explore the potential of biofuels and other alternative-energy research discoveries.
In 2016, Dr. Rausser published with his colleagues, Holly Ameden and Reid Stevens, his book Structuring Public-Private Research Partnerships for Success: Empowering University Partners, which presents a framework for structuring public-private research partnerships that protect both these institutions’ academic freedom and the private firm’s corporate interests.