Hope you enjoyed reading our newsletter last week, in which we introduced the concept of Litigation Finance, the considerations from ethical perspective, the benefits for plaintiffs and investors as well as how tokenization can make Litigation Finance more accessible.
Litigation Finance is a very interesting area and a few companies are actively working on the development of technology and platforms to revolutionise this area. One of them is RisikoTek. The founder and CEO of RisikoTek, Elke Biechele, shared her vision and thoughts with our Managing Partner, Edward Shen. The discussion focused on the future of Litigation Finance and how tokenization will be the catalyst for this innovation, making Litigation Finance more investable and accessible to a broader investor base.
This interview is also available on LinkedIn.
Edward: Hi Elke, it's nice to meet you. Can you tell us more about the concept of Litigation Finance and why it is a growing field?
Elke: Litigation Finance is a fairly new funding mechanism, designed to provide case funding by mostly lawyers for lawyers in return for a share of the settlement, often as much as 40-50%. However recently, more investors have discovered the earning opportunity, making Litigation Finance one of the fastest growing investment opportunities.
Edward: What is your vision for Litigation Finance?
Elke: Litigation Finance is a fast growing alternative investment, yet only the biggest corporations have access to it and only if the legal claim has progressed far enough to predict the outcome.
This leaves an enormous gap in the market where $trillions worth of lawsuits cannot currently progress due to a lack of financing. The process of obtaining Litigation Finance is manual, lengthy and laborious and suitable only to very large cases with a clear legal path.
An automated solution is required that is efficient, more standardised, easily traceable and that allows for more investment from a broader investor base such as from general accredited investors. By securing increased funding from additional accredited investors, Litigation Finance platforms can effectively enhance their capacity to provide support to a larger group of deserving plaintiffs with meritorious cases.
Edward: What is the size of the claims that you have collected?
Elke: RisikoTek has accumulated a $5.2 billion claim portfolio and is currently facilitating the Litigation Finance process manually. We are building an automated tokenized exchange where small and large businesses and private individuals can raise cases through their lawyer. Investors will be able to find cases matching their individual preferences such as investment amount, risk profile and time horizon. The return for investors could potentially be in excess of 100x.
Edward: What is the current state of access to Litigation Finance for smaller investors, high net worth individuals, hedge funds and institutional investors?
Elke: Non-lawyer investors have a difficult time accessing those opportunities. While some law firms operate their own fund, generally, it is a closed-door black box kind of opportunity only open to very select investors from the legal community. Once invested it is also difficult to trade out of the fund or to have a say in the claims the funds should specifically invest into or in general the risk – return profile and investment horizon.
Edward: How does your platform aim to make investment in Litigation Finance easier and more accessible?
Elke: Our platform allows for any size investments including smaller sizes and partial investments. The automated solution allows to analyse cases and invest into particular ones matching individual requirements such as risk appetite, time horizon and cause. The investment profile itself is dynamic – where cases that are more complex will receive a larger share of the payout, while simpler but sure cases will have a smaller share of the payout.
Edward: Can you explain the process of how the automated marketplace will work?
Elke: The process is very intuitive. A firm or an individual will approach their lawyer with their case. If the lawyer thinks there is merit in the claim she/he will raise the claim on our platform. We will provide the case analytics via AI algorithms and the case is made available for investment. Investors search for a case matching their requirements and supply the funding via the use of tokens. Now the legal work is funded and the plaintiff and his/her lawyer can progress with the case and have a chance to win the case in court or agree on a settlement. Upon the plaintiff winning the case in court or settlement the investor’s account is credited with her/his agreed share of the payout. The investor can choose to withdraw the funds or reinvest into other cases.
Edward: What is the potential return on investment for investors in the Litigation Finance market?
Elke: The returns have a vastly diverse potential ranging from a modest 2x return for straight forward cases to a potential return in excess of 100x depending on the risk profile of the case and of course the outcome. Unfortunately, many clear, straightforward cases never get raised because of a David versus Goliath scenario or where investigation first needs to take place. Those are now possible and offer a vast selection of returns to the investor including fast as well as very lucrative returns.
Edward: How do you plan to ensure the reliability and security of the exchange for both plaintiffs and investors?
Elke: The platform is guarded by the legal profession. All processes have a strong compliance framework and are legally vetted. Technology wise we are working with top cloud security experts to ensure the safety of our investor's investments.
Edward: Can you tell us about your team and their experience in the financial industry, law practice and tech industry?
Elke: The company is founded by seasoned bankers with over 25 years of experience in the financial industry, having held leadership positions in top-tier banks across Capital Markets, Risk Management and Compliance. Our team comprises highly skilled technology experts, data scientists, and computer science professionals with an impressive track record. In addition, we have established partnerships with several renowned global law firms.
Edward: How do you plan to scale the platform and expand its reach in the future?
Elke: We will add more and more countries and increase the variety of categories for civil cases such as small and large, fast and slow, complex and straight forward. We will make investment available using different currencies, financing and payment mechanisms.
Edward: What sets your platform apart from others in the market?
Elke: Our upcoming platform offers a modern solution to the largely manual process of investing in Litigation Finance. Through collaboration with reputable law firms, we will provide compliant and legally vetted Litigation Finance cases, all analyzed by proprietary AI algorithms. In addition, our platform will feature a marketplace that enables secondary trading of those funded cases, creating a more dynamic and flexible investment opportunity. Our user-friendly and transparent approach will make investing in Litigation Finance easy and profitable for all parties involved.
Edward: Elke, thank you so much for taking the time to speak with me and for introducing me to your vision of Litigation Finance. I enjoyed the session and appreciated learning more about your plans for the future of Litigation Finance. It is clear that you are committed to contributing to development in civil justice and making Litigation Finance more accessible to a broader group of individuals. Once again, many thanks for your time and insights.
QIDS Venture Partners is dedicated to supporting and catalysing the developments in FinTech by sharing with our audience FinTech trends and interesting FinTech business ideas. You may forward this article to other investors who are interested in FinTech as well. If you need more information or would like to arrange a meeting with us, please feel free to contact our Managing Partner Edward Shen via LinkedIn or email.
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