Legalist, a San Francisco-based litigation finance company started by two Harvard University dropouts and advised by retired 7th U.S. Circuit Court of Appeals Judge Richard Posner, has just raised $100 million, which it will use to fund plaintiffs in 100-200 commercial cases over the next two years.
Legalist scrapes federal and state court records and then uses algorithms to predict case outcomes and determine the best cases in which to invest. It invests exclusively in mid-market cases that require less than $1 million in funding.
Litigants (or their attorneys) apply for funding and, if approved, Legalist covers all litigation costs, including attorneys’ fees, deposition costs and working capital for a business. Repayment comes only if a case results in recovery.
“Legalist leads the new wave of technologists using artificial intelligence and machine learning to streamline and underwrite litigation investments,” says the company’s website. “Our proprietary technology has been recognized by leading publications as revolutionizing the way plaintiffs interact with the justice system.”
Legalist raised $10.25 million in 2017 for what it describes as its Fund I and used that to fund 38 cases. The $100 million raise, Fund II, includes institutional investors such as insurance companies, endowments and fund-of-funds.
Two Harvard students, Eva Shang and Christian Haigh, formed Legalist in 2016, originally planning to create a site that would rate lawyers based on publicly available court records. Later that year, after receiving a $100,000 fellowship from the Thiel foundation and then participating in the Y Combinator accelerator program, they pivoted their company to focus on litigation finance.
“Technology allows Legalist to fund ‘David versus Goliath’ cases brought by small businesses,” Shang, now CEO, said in a statement released by the company. “By identifying cases that are likely to be successful, our algorithms allow us to deliver consistent performance to our clients and investors.”
According to Techcrunch, 7% of the company is owned by Y Combinator and other principal stakeholders include VY Capital and Refactor Capital.
In June, Posner, who made a surprise retirement from the 7th Circuit in 2017, announced that he was joining Legalist as an advisor.
“The principal motive for my retirement was the failure of the court to treat litigants without financial resources fairly,” Posner said in a statement issued by Legalist. “Litigation finance patches an important hole for businesses with valid claims who lack the funds to hire an attorney.”