LexShares is doubling down on its second fund, which has already raised $30 million toward a target of $100 million, the company said Wednesday.
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The Boston-based commercial litigation funding firm, founded in 2014, closed the LexShares Marketplace Fund I in January 2018, after being fully subscribed for $25 million, Jay Greenberg, co-founder and CEO told Crunchbase News.
He explained that litigation finance originated in Australia and the United Kingdom, jurisdictions where the loser of the lawsuit pays for legal fees.
In the United States, which does not have those same rules, litigation finance began gaining traction following the 2008 economic downturn. Companies that had litigation, even law firms themselves, couldn’t afford to fund lawsuits, he added. One of the more standout examples of this was billionaire Peter Thiel funding Hulk Hogan’s lawsuit against Gawker.
“Litigation finance is this product that allowed meritorious cases to carry on without anyone taking the risk,” Greenburg said.
The LexShares Marketplace Fund II will invest in legal claims submitted to the LexShares platform, he said.
The company invests in business litigation—businesses suing other businesses—and looks at the merits of the case before considering investment, similar to how venture capitalists look at startups.
Early on, LexShares was reliant on inbound deal flow but has since developed a “diamond mine” piece of software that curates about 75 percent of the company’s deal flow by aggregating federal cases and looking for relevant keywords, he said.
“If we determine a case is investable, we would provide nonrecourse capital that could be used by the company to continue its business operations during the lawsuit,” he said. “If the company loses the lawsuit, they owe nothing. If the company wins, the only thing we get is potential future recovery from the lawsuit.”
The company has seen an uptick of demand from businesses during the COVID-19 pandemic due to trying to shore up their balance sheets, Greenberg said.
As of Wednesday, LexShares had invested in 103 case offerings, collectively underwriting more than $2.63 billion of financing for lawsuits, including $855 million in 2019.
Illustration: Li-Anne Dias