Website Leverages the “Crowd” to Finance Lawsuits with Crowdfunding
A few weeks back a new website was unveiled that uses crowdfunding to finance high-value commercial lawsuits. According to the Wall Street Journal and the company’s press release, LexShares connects accredited investors with plaintiffs in commercial lawsuits.
“Invest in Justice”
The company’s slogan suggests a novel idea in the crowdfunding world, and breaks away from the “traditional” reasons for raising capital through crowdfunding, which is raising operating capital to fund startups and small businesses.
LexShares’ staff of securities professionals review the lawsuits and only post suits that have “strong merit.” The target lawsuit for the company is one with $10 to $40 million in claim value. According to the press release, if the plaintiff wins the case, then the investors will recover an amount “proportionate to the investment,” and if the plaintiff loses, the investors lose the money they invested in the suit.
LexShares recently closed its series seed round of financing, which was led by the early stage investment group Atlas Ventures.
The company was founded by its CEO Jay Greenberg, a former technology investment banker at Deutsche Bank, and Max Volsky, the founder of the litigation finance fund LexStone Capital. For those of you not familiar with investing in litigation, the company has a Litigation Financing 101 page with basic information about the concept—it is essentially “betting” on the outcome of a case.
While legislators may not have thought of this type of crowdfunding campaign when they passed the JOBS Act last year, it is interesting to see crowdfunding being used in new ways.