A startup called Legalist plans to make money by using data analysis in the field of litigation. Co-founded by two Harvard Undergrads, Eva Shang and Christian Haigh, Legalist will fund your lawsuit in exchange for a cut of any money that is awarded, but only if they think you have a chance of winning. Their algorithm analyzes tens of millions of court cases and considers 58 variables to determine a case’s likely outcome. “One of the biggest predictors of case outcome is the presiding judge and one of the biggest predictors of length is the number of cases that judge is concurrently working on,” Shang stated.
Litigation finance is a lucrative business, with an average return on investment of $1.40 per $1 spent. However the decision on whether or not to fund a particular case is usually in the hands of trained legal experts. The use of algorithmic data analysis to make the decision is what sets Legalist apart in the field. The company expects to spend between $50,000 and $500,000 on each suit. The startup has invested $75,000 in one case which has a potential verdict of $1 million.
The startup has drawn some attention over its connection to Peter Thiel. Thiel was cast as both hero and villain by different groups when it was revealed that he was funding several lawsuits against Gawker, including the Hulk Hogan case. Legalist was among numerous startups which received $100,000 from the Thiel foundation. However, at the time the funding was announced, the startup wasn’t in the business of funding litigation. The original vision for the startup was to provide analytics to lawyers so they could keep up to date on the latest developments in case-law.
The startup changed its focus because, “The analytics weren’t as interesting to lawyers as we thought they would be,” Shang explained, “We realized what a great opportunity this is to use our data to help small companies and people who otherwise wouldn’t be able to afford to litigate their cases.” She also defended litigation finance by stating, “Litigation today is messed up and favors people who have money. Litigation financing levels the playing field.”
Speaking to Business Insider, Shang tried to separate the startup from Thiel, stating that the company would not fund lawsuits by individuals, like the Hogan case against Gawker. It also will not hand out money to people to encourage them to sue, but instead will only finance cases that are already in progress to see that they reach completion. The startup will focus on helping small business in tort cases. An example given by Shang is a bakery which had a pipe explode and has been locked in a lawsuit with its insurance company for years.
Will this startup help small business owners defend themselves from richer adversaries, or will it assist trolls in shopping around for agreeable judges? Leave your comments below.