The process allows investors to cover the cost of a lawsuit in exchange for a share of the financial settlement which was what billionaire Peter Thiel did when he secretly funded a lawsuit from Hulk Hogan against Gawker Media.
The new start-up is called Legalist and uses an algorithm to look at civil lawsuits to predict case outcomes and determine which civil lawsuits are worth investing in.
Legalist cofounder Eva Shang has received a $100,000 investment from Thiel’s foundation to build the startup. She told Business Insider that the Gawker lawsuit is something that the company would be staying away from. Instead, the company will be focusing on commercial and small-business lawsuits.
Legalist says it uses an algorithm of 58 different variables including, the presiding judge is and the number of cases the judge is currently working on. The algorithm has been fed cases dating back to 1989 and helps people figure out how long a case will last and the risks associated with it.
In a presentation at Y Combinator’s Demo Day on Tuesday, the founders claimed that the startup funded one lawsuit for $75,000 and expects a return of more than $1 million. Shang says the $1.40 is earned for every $1 spent in litigation financing, which can prove to be a profitable enterprise when you’re spending hundreds of thousands of dollars.
So it looks like there will be a world where investors can invest in lawsuits and clean up. Has the world gone stark raving mad? [Yes.ed]