Delhi-based startup launches litigation financing product for retail investors 

At a time when many alternate investment avenues are opening for Indian investors, an Indian start-up has launched a litigation financing product specially designed for retail investors. Through the venture, investors can fund third-party litigations for as low as Rs 25,000. 

Delhi-based LegalPay plans to fund medium to late-stage commercial arbitration cases, which are typically settled in a time-bound manner.

Simply put, litigation financing refers to third-party funding of litigation matters. Litigation financing is quite popular in many of the developed economies where there are dedicated institutional investors and funds as well that specialise in such kind of alternate investments.

The Indian start-up, which is backed by venture capital firms such as 9Unicorns and LetsVenture, plans to create a Special Purpose Vehicle (SPV) to create a pool of around a dozen legal cases that will enable risk diversification while focusing on B2B commercial cases based on factors like quantifiable damages against well-capitalised defendant, high-performing legal team and a clear visibility about the settlement timeline.

The process is simple though. Both, lawyers and litigants can approach the start-up with case details and the funding requirement. A Non-Disclosure Agreement (NDA) is signed between LegalPay and the applicant after which the venture does its own due diligence. Once approved, a term sheet is signed between the applicant and the venture that lays down the terms of litigation funding. Finally, a third-party litigation funding agreement is executed, and the funds are deployed.

However, an important aspect of litigation funding is that it is a non-recourse form of investment wherein the investor gets money only when the litigant wins the case.

Founded last year by Kundan Shahi, the start-up aims to focus on potential late-stage B2B commercial cases that are nearing closure and have a financial requirement ranging from Rs 20 lakh to Rs 3.5 crore.

“Earlier, only the ultra-rich had access to this asset, but we are making it accessible to anyone and everyone. Anyone can invest with a starting ticket size of Rs 25,000,” said Shahi.

“The investments from the pool are structured in such a manner that even if only one out of six cases is won, the invested capital for the investors will be secure. With the pandemic adversely impacting businesses, litigation cases are on the rise,” he added.

The start-up plans to deploy over Rs 100 crore over the next two years on late-stage cases that have the potential of faster realisation.

Also read: Mindtickle latest unicorn after funding led by SoftBank; valued at $1.2 bn
Also read: EdTech firm upGrad raises $185 mn, enters unicorn club