Legalist, a San Francisco- based litigation finance startup, is helping to shape the future of the legal funding industry.
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“What we’re really doing is we’re allowing our clients to have access to justice, and feel like someone who isn’t their lawyer believes in them, believes their story — and puts their money where their mouth is,” Eva Shang, cofounder, said to Business Insider.
Simply put, litigation funding is the practice of using third-party financing for lawsuits in return for a portion of the settlement if the case is won. That funding can be invaluable to a firm as it greatly eases the monetary strain on litigants and even enables some cases that would otherwise never be heard to be taken to trial.
While litigation finance has been around since the 2008 economic downturn, Legalist’s innovative strategy has produced great economies of scale since its launch in 2016. In contrast to larger litigation funders, Legalist targets the lower-middle market focusing on smaller businesses and investments, with most cases averaging around $500,000. Chiefly assisting businesses with commercial claims, Shang and Legalist have also made it a priority to take on civil rights cases.
As the pandemic has undoubtedly changed the way litigation is happening in the US, the growth of the litigation financing industry has been exponential. Legalist itself has had to double its number of underwriters to keep up with it’s expansion in the last few months.
The startup currently oversees $140 million in assets under management for investors like insurance companies and family offices and is targeting $1 billion in assets in 2021. They’re not only blazing a trail with their unique business model, Legalist has even become a member of a trade association that works to shape US regulations in litigation finance.
The technology Legalist uses is their ultimate tool to assess the probability of success in their considered cases. Its algorithm combs through the 100 million civil court cases filed each year, filters down to the 1% of cases that are likely to yield favorable incomes, then the team of attorneys vets each case to determine which they’ll take on. The risk is that if the business does not win its lawsuit, then Legalist receives no payout.
While it is a somewhat risky business model, Legalist’s growth over the past four years has shown that third-party funding can be a more than viable option for litigants. As the surge in demand for legal funding continues to grow, watch for Legalist and other litigation finance companies as they will have plenty of opportunity to “put their money where there mouth is.”
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