Founded in 2020 by Kundan Shahi, LegalPay claims to be the first homegrown litigation finance company. It is a third-party litigation finance platform that helps entities/businesses with the financial burden of litigation cases such as shareholder and IPR related disputes. Such cases are filtered with the help of technology from the websites of Indian courts. Basically, LegaPay focuses mostly on late-stage cases or those that are nearing closure with a financial requirement of Rs 20 lakh to Rs 3.5 crore. The cases are financed through funds raised from large family offices and HNIs/ultra HNIs in India.
“We are creating an alternative-investment asset class for investors, regardless of their net worth; an opportunity to realise significant returns through litigation finance,” says Shahi. “While I spent considerable time in EXL in the insurance department working with the largest insurance company in the world, my first startup was in the legal space where I got to know that the biggest problem in this industry is legal expense. While the lawyers need immediate working capital, their clients often are not able to pay them on time as they do not have immediate capital available.” That got him thinking whether a product like insurance could be built in this segment. However, setting up an insurance company in India is a long process with various financial and regulatory requirements. “During my research I also got to know about litigation funding which also solves this problem a little differently and decided to start LegalPay as a litigation finance company,” says Shahi.
Litigation funding globally, says Shahi, is a huge market with multiple listed players offering this service across different jurisdictions. While litigation funding has been happening in India since the 18th century there is no other formal player offering this service, “except LegalPay,” he claims. “We have institutionalised the entire practice to ensure a seamless process for our users. We are a tech-focused, data-driven litigation funder which significantly leverages the use of technology and data in our underwriting process. Every case that comes to us passes through a 15-point checklist proprietary algorithm which rates the case on different metrics and only the highly meritorious cases reach our legal and risk team.”
Another major difference is that most litigation funders operate on a fund structure in which only the ultra rich can invest in. “We are democratising the access to retail investors to invest in this asset and anyone can invest in this asset class through our technology platform. The first SPV which we launched was both oversubscribed and closed in a record time showing how confident retail investors are of our offerings,” he informs.
Recently, LegalPay raised an undisclosed seed funding round led by accelerator venture capital 9Unicorns to tap an estimated $20 billion legal expense market in the country. The short term vision of the company is to create investment in litigation finance as an alternative investment asset and make it available to retail investors.
“Through superior product development and innovation we want to make this alternative investment class a widely used product. Through LegalPay, I aspire to create a banking system in the legal industry in India similar to how NABARD services the financial needs of the agriculture sector in India,” says the founder. “We want to build products in the insolvency and litigation funding market in India and acquire a significant market share in them. We aim to have a claim under management of Rs 200 crore by the end of this financial year which will be distributed equally between litigation funding and interim financing.”