2016 shaped up to be a potentially breakout year with celebrities entering the industry and attracting countless headlines, codification of legal funding into law in two states, and to cap it all off, the first major deal in the space with Burford's landmark acquisition of Gerchen Keller.
Here's my list of the seven most impactful events from the past year and what they might mean for legal funders in 2017.
Here's a quick recap for those of you who are new to this blog:
Peter Thiel financed Terry Bollea's (aka Hulk Hogan) lawsuit against Gawker, a media company. Gawker had published a sex tape of Bollea, and so Bollea was suing for invasion of privacy. Thiel, who was outed by Gawker years earlier, invested $10 million in Bollea's legal fight due to what many believe was a personal vendetta against Gawker. Whether Thiel's motivation was "right" or "just" is beside the point. The fact is that Bollea had a meritorious case (the jury decided in his favor), one that he said, despite being a celebrity, he would not have been able to fully pursue without Thiel's financial help. Thiel's investment is thus an example of justice-oriented financing.
Yes, we could have hoped for a better fact pattern, but we think net-net the "all news is good news" adage rings true here. We've noticed a sharp uptick in people's familiarity and understanding of the asset class post-Thiel. Case in point, so much conversation was happening around this that it garnered its own Moment on Twitter.
For a deeper take: Is Peter Thiel's Foray into Litigation Finance Good for the Industry?
Indiana codified legal funding into law, which by and large was a positive for the industry. For one thing, the act explicitly states that legal funding "is not a consumer loan."
On the flip side, it made it more difficult for certain funders to operate in the state with mandates including:
Vermont also introduced legal requirements for consumer litigation finance companies that wish to operate in the state via Vermont House Bill 84. Similar to Indiana, the law requires legal funders to obtain a license to operate in the state. It also stipulates reporting requirements, and maintains that certain information must be disclosed to plaintiffs.
While Vermont isn't exactly a hotbed for legal funding, anyone operating in the state should review the legislation to ensure compliance.
Although Taylor Swift didn't garner as much publicity as Thiel, I think it was still a big deal, as I made clear in an earlier post. One of the biggest celebrities on the face of the planet provided $250,000 to a plaintiff so that they could remain patient while their legal battle played out.
No one in mainstream media explicitly called it litigation finance, but that is exactly what it was. Legal funders can now tell their kids, or grandkids, they are in the same profession as Taylor Swift.
Building off of the fever caused by Peter Thiel's connection to legal funding, Eva Shang demoed Legalistat the famous Y Combinator Demo Day as a modern commercial funder that will leverage big data to fund cases, which are traditionally thought to be too small for the big commercial funders' costs to evaluate. Due to their connection to Thiel and the news that they intend to use big data to fund lawsuits, it was a story that trended on Twitter and other tech media for days.
This press also generated a debate amongst Silicon Valley elite as to whether or not legal funding is a positive thing. Legal funding came out on top when Marc Andreessen, one of the best-known investors in Silicon Valley, tweeted "This is a massive leveler to help people with few means pursue justice in our legal system. An obvious public good!"
This was the first venture capital financing round in the legal funding space since Mighty's in 2015 and Lexshares' in 2014.
The year ended with a bang when this $175 million deal turned two of the largest players in commercial litigation finance into a behemoth. Not only was it a sign that the market is maturing, but it also brought legal funding into the national spotlight, yet again.
Also notable was the ascent of Burford's stock price in 2016.
In 2016, we set out with the goal of becoming the technology provider for the legal funding industry. Since then, over 30 top legal funding companies have partnered with Mighty to upgrade from spreadsheets, off-the-shelf sales CRM's, and expensive and outdated homegrown software to a modern system built for the industry, by the industry.
With hundreds of businesses reading each week, we also built the #1 content site aimed at helping funders learn about ways they might improve their businesses (even if it was a 1-man race). We're very grateful for you, our readers, and your vocal support, thoughtful feedback, and positive engagement.
We're proud of what we've accomplished in such a short time, and we think that it is a sign that the industry is growing and evolving. Although we're happy to be the first service provider to legal funding companies, we certainly won't be the last, and we are excited to see how the industry continues to mature and progress in 2017.
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