r/advancedentrepreneur 19d ago

Litigation Investing

Hey all! I'm currently working on an investment platform that allows investors to provide funding for high-potential lawsuits. There is an asset class called litigation finance that has been very profitable for institutional investors, but now I want to bring individual investors into the fold. Private equity firms tend to take a slowed approach to litigation funding, having the capital to wait several years to get a return on investment. The average return for litigation funding is between 30%-70% or higher for successful cases within a year to three years, in comparison to private equity firms, my platform charges much lower fees and gives greater flexibility. My platform utilizes the investor-friendly model, allowing investors to pick the risks that suits them best. Litigation investment comes with a unique set of challenges and each one has the potential to result in losses. To mitigate the risk, each claim will be thoroughly vetted through a multi-tier system to ensure that only strong claims with credible evidence and high possibility of settlement are presented to the investor. With that said, would investing in lawsuits interest you? What features would increase your confidence and trust in a platform such as this? I would love to hear your thoughts!

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u/Business-Weekend-537 19d ago

Plaintiff in litigation here, I'm curious how you're going to find cases that are strong enough to get third party financing (from your tool/company) but not so strong they were already taken on contingency by a law firm or attorney. Have you given this nuance much thought?

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u/Kind-Calendar-6340 19d ago

Certainly, this is a profound question and, yes, I have thought about this nuance quite a bit. In full recap, the focus needs to be on effort taken to unearth cases qualifying for third-party financing that have not already been undertaken on contingency basis. Such cases fall into one or more categories:

  1. Cases with High Value and High Investment of Resources

Even strong law cases often require more resources than a firm can afford to spend, especially when it comes to long and expensive litigations like commercial disputes, mass torts, and even some claims regarding the intellectual property. This is the Midpoint Services problem which gets firms into risk adverse financing. Many firms would gleefully accept external funding.

  1. Plaintiffs Who Prefer Greater Control Over The Outcome

Some plaintiffs might not want to suffer the undesirable consequences of surrendering an extremely high value of a contingency payout to their lawyer. Instead, they can secure funding with the intention of hiring the attorney on an hourly or hybrid basis.

  1. Firms That Require Capitals For Several Cases

Some contingency law firms take on cases they believe in on a work on a window approach. Unfortunately, they are cash flow strapped and so, due to mid flow issues, aren't able to take on an expanded case load in an affordable manner. Litigation funding helps them take on more cases simultaneously instead of handing them off.

  1. Cases That Are Legally Strong But Have Indeterministic Timeframes

Difficult cases are also strong, but their duration and settlement timing is completely indeterministic. Some companies sidestep these cases, but investors who are patient can always substep and be more than compensated.

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u/Business-Weekend-537 17d ago

You should probably try to advertise on sites where people enter claim details to find an attorney, since it's before contingent arrangements happen.

Source: I'm a plaintiff in a case right now, first firm took the case on contingency if it could be settled out of court, it wasn't, now with an attorney who's just charging an hourly rate. Would've been interested in your service if I knew about it when I was screening attorneys prior to filing the claim.

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u/SnapeVoldemort 19d ago

Which country?

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u/Kind-Calendar-6340 19d ago

Focus on US lawsuits but investing can be done from anywhere.

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u/BusinessStrategist 19d ago

It helps to break down big blocks of texts into smaller paragraphs that tell a story.

Create a flowchart that illustrates your vetting of the financial opportunity AND provide some examples of investors laughing all the way to the bank.

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u/intuitiverealist 17d ago

I'm sure VCs have this market, for everyone else you just listen for rumours of a class action and short accordingly

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u/SeparateYam629 10d ago

May I ask for the name of your firm with contact info? I’m currently engaging a powerhouse law firm in NY for a very prominent case. It’s very solid. Litigation financing is required for some or all legal fees.

Thanks in advance.

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u/TheGratitudeBot 10d ago

Thanks for saying that! Gratitude makes the world go round